November 1999

Makoto Yano (Keio University)

"Trade Imbalance and Domestic Market Competition Policy"

International Economic Review

<myano@econ.keio.ac.jp>

This study investigates the effect of a country's suppression of competition

in its market for non-tradables. It assumes that the initial equilibrium is

stationary and demonstrates that if competition is suppressed in a small

country, the country's trade surplus increases in the short run. In the

large country case, the same change creates an excess demand for future

tradables and affects the relative price between present and future

tradables. Using a two-country model, the study shows that this price change

redistributes real wealth from the country with a trade deficit to the

country with a trade surplus.

October 1999

Murray C. Kemp (University of New South Wales) and Koji Shmomura (Kobe University)

"Gains from international trade in a Cournot-Nash general equilibrium"

Japanese Economic Review

<simomura@rieb.kobe-u.ac.jp>

It is shown that, in a context of Cournot-Nash general equilibrium, free

trade is potentially gainful for each trading country.  No restrictions are

placed on the numbers of products, factors of production or countries, or on

the nature of returns to scale.  Moreover, preferences, techniques and

factor endowments can differ from agent to agent.

Murray C. Kemp (University of New South Wales) and Koji Shimomura (Kobe University)

"A second elementary proposition concerning the formation of customs unions"

Japanese Economic Review

<simomura@rieb.kobe-u.ac.jp>

The conclusions of the 1976 Kemp-Wan proposition are shown to be valid even

if, after the formation of a customs union, the tariff vectors of some

non-member countries are optimally chosen.

Murray C. Kemp (University of New South Wales) and Koji Shimomura (Kobe University)

"An antiquarian note on optimal tariffs"

History of Political Economy

<simomura@rieb.kobe-u.ac.jp>

It is shown that, under conventional assumptions, the optimal tariff vector

of a countryr can be null if and only if the country's free-trade net import

vector is null.

September 1999

Takumi Naito (Osaka University)

 "A Rationale for Infant Industry Protection and Gradual Trade Liberalization"

Review of Development Economics

<tnaito@compsrv.econ.osaka-u.ac.jp>

 We construct a two-final-good, one-primary-factor, small-open endogenous growth

 model based on R&D. The model yields two steady states with different growth

 rates as potential equilibria. Depending on history and an external environment,

 the economy may fall into the poverty trap in free trade. However, some

 temporary trade policy can release the economy from the poverty trap. Moreover,

 the optimal trade policy is gradual trade liberalization with the rate of

 protection kept to a minimum.

May 1999

Taiji Furusawa (Yokohama National University)

"The Optimal Penal Code vs. Infinite Nash Reversion in Trade Liberalization"

Review of International Economics

<furusawa@ynu.ac.jp>

This paper derives Abreu's (1986) stick-and-carrot strategy optimal penal codes

in a partial equilibrium model that has been widely used to examine trade liberalization.

Unless the asymmetry between countries is significant, the optimal penal codes take

simple form. It is also shown that the difference between the most-cooperative pairs

of tariffs supported by two schemes, the optimal penal code and infinite Nash reversion,

crucially depends on the size of the surplus from exports that a deviating country forgoes

when the other country places an embargo, rather than the (punitive) optimum tariff,

on imports in the punishment.

Taiji Furusawa (Yokohama National University)

"The Negotiation of Sustainable Tariffs"

Journal of International Economics

<furusawa@ynu.ac.jp>

The governments of two countries explicitly negotiate over a new pair of tariffs.

As soon as they reach agreement, the countries put into effect the agreed-upon pair

of tariffs, which must be self-enforcing. We investigate how the difference in the two

governments' patience affects the negotiation results. Provided that the common

optimum tariff is the status quo tariff rate for each country, we find that the country

with the more patient government gains most from the negotiation if the time lag

between a defection and punishment in the implementation phase is short. The opposite

is true if the response lag in the implementation phase is long.

Taiji Furusawa (Yokohama National University) and Edwin Lai (City University of Hong Kong)

"Adjustment Costs and Gradual Trade Liberalization"

Journal of International Economics

<furusawa@ynu.ac.jp>

This paper analyzes dynamic bilateral trade liberalization between two large countries.

Trade liberalization causes the importable sector of each country to shrink and thereby

causes reallocation of labor between sectors. Assuming that each moving worker must

pay a fixed adjustment cost, a country has to bear a total adjustment cost which is linear

in the amount of moving workers. We derive the most-cooperative, self-enforcing trade

liberalization path, and find that in general trade liberalization is gradual. We also find

that trade adjustment assistance that compensates workers for relocation out of

the protected sector will accelerate the pace of trade liberalization.

Michael Conlin (Cornell University) and Taiji Furusawa (Yokohama National University)

"Strategic Delegation and Delay in Negotiations over the Bargaining Agenda"

Journal of Labor Economics

<furusawa@ynu.ac.jp>

This paper develops a game-theoretic model that endogenizes the items included

in the bargaining agenda. The model's equilibria suggest two possible sources of

inefficiency: (1) exclusion of items from the bargaining agenda, and (2) delay to

agreement due to negotiations over the bargaining agenda. Evidence from union

contract negotiations is provided to demonstrate the relevance of these sources of

inefficiency. The model also allows strategic delegation by the union. In certain equilibria,

the surplus-maximizing union selects wage-maximizing delegates (such as senior union

members) to negotiate the contract.

April 1999

Masao Yamada (Tokuyama University)

"Specialization and the Big Push"

Economics Letters

<yamada@tokuyama-u.ac.jp>

In this paper, we consider industrialization as the situation in which

economy achieves high productivities by an increase in the degree

of specialization. We study it by introducing intermediate goods sectors

in the Murphy-Shleifer-Vishny model of the big push, and show the

existence of multiple Pareto ranked equilibria.

March 1999

Noritsugu Nakanishi (Kobe University)

"Reexamination of the International Export Quota Game

through the Theory of Social Situations"

Games and Economic Behavior

<nori@rose.rokkodai.kobe-u.ac.jp>

We reexamine the Rodriguez-Tower quota retaliation within the framework

of the thoery of social situations. We construct a model of the quota retaliation

game as an "individual contingent threats situation." In a static, essentially

non-cooperative setting, we show that every solution, called a "stable standard

of behavior," supports at least one Pareto-efficient combination of quotas and

vice versa. Free trade can be rationalized by a solution.