Makoto Yano (Keio University)
"Trade Imbalance and Domestic Market Competition Policy"
International Economic Review
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.
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
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
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
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
 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
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
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
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
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.
Masao Yamada (Tokuyama University)
"Specialization and the Big Push"
Economics Letters
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.
Noritsugu Nakanishi (Kobe University)
"Reexamination of the International Export Quota Game
through the Theory of Social Situations"
Games and Economic Behavior
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.