[Show abstract][Hide abstract] ABSTRACT: In this paper, we examine the role of export promotion agencies (EPAs) in promoting exports from Japan and Korea. Looking at two home countries enables us to tackle endogeneity issues by controlling for both country-pair time-invariant characteristics and importing country time-varying characteristics. Our empirical results indicate that the coefficients of the EPA dummy are similar in size to those of the FTA dummy. This implies that establishing an EPA office in a country is equivalent to signing an FTA with that country. In addition, we find that EPAâ€™s effects are larger for manufactured products than non-manufactured products. Finally, the EPA effect is larger for low income trade partners than for high income trade partners.
The Developing Economies 09/2014; 52(3). · 0.15 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: Unlike most existing studies, this paper examines the location choices of MNEs in developing countries. Specifically, we investigate the location choices of Japanese MNEs among East Asian developing countries by estimating a four-stage nested logit model at the province level. Noteworthy results of location elements are as follows. As is consistent with the mechanics of cheap labor-seeking FDI, Japanese MNEs are more likely to invest in locations with low income and low tariff rates on products from Japan. Also, accessibility to other locations and/or ports matters in attracting Japanese MNEs because it is crucial in importing materials and exporting their products. In addition, WTO membership and bilateral investment treaties are important because these contribute to the settlement of trade and investment disputes, which is more likely to be necessary in developing countries.
[Show abstract][Hide abstract] ABSTRACT: In this paper we examine the role of investment promotion agencies (IPA) in promoting outward foreign direct investment (FDI) from Japan and Korea. Looking at two home countries enables us to control for both country-pair time-invariant characteristics and host-country time-varying characteristics. Our empirical results suggest that home-country IPA tend to be more effective in promoting outward FDI in politically risky host countries. However, this finding depends on whether the home-country firm is listed or unlisted. More specifically, we find that the positive effect of home-country IPA on outward FDI in politically risky countries is limited to unlisted home-country firms, which tend to be less productive.
Asian Economic Journal 06/2014; 28(2). · 0.30 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: In this paper, we empirically investigate the effect of diagonal cumulation on free trade agreement (FTA) utilization by exploring Thai exports to Japan under two kinds of FTA schemes. While the one scheme adopts bilateral cumulation, the other scheme does diagonal cumulation. Comparing trade under these two kinds of FTAs, we can examine the effect of diagonal cumulation without relying on not only the variation in cumulation rules across country pairs but also the variation across years. In short, our estimates do not suffer from biases from time-variant elements and country pair-specific elements. As a result, our estimates show around 4% trade creation effect of diagonal cumulation, which is much smaller than the estimates in the previous studies (around 15%).
Journal of the Japanese and International Economies 06/2014; · 0.40 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: The scope of recent regional trade agreements (RTAs) is becoming much wider in terms of including several provisions such as competition policy or intellectual property. This paper empirically examines how far advanced, non-conventional provisions in RTAs increase trade values among RTA member countries, by estimating the gravity equation with more disaggregated indicators for RTAs. As a result, we find that the provision on competition policy has the largest impacts on trade values, following that on government procurement. Our further analysis reveals that the more significant roles of these two provisions can be also observed in the impacts on the intensive and extensive margins.
Journal of Applied Economics 05/2014; 17(1). · 0.26 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: This study investigates the determinants of overseas research and development (R&D) and the influences of various aspects of localization on affiliates' R&D intensity. Using a dataset of Taiwanese multinational enterprises (MNEs) in China, the empirical estimations find that MNEs with a larger firm size, more R&D expenditure, and a higher outward foreign direct investments intensity tend to undertake R&D. Host regions' characteristics, particularly market size and R&D resources, do matter for attracting MNEs to conduct R&D locally. Crucially, affiliates' R&D intensity is related to the degree of localization. The degree of market localization and localization of the R&D network has a positive association with affiliates' R&D intensity. From the perspective of R&D policy, a country with healthy R&D infrastructures helps attract the establishment of R&D labs of MNEs.
[Show abstract][Hide abstract] ABSTRACT: In this paper, using the worldwide dataset of bilateral tariff rates, we explore how serious the omission of bilateral tariff rates in gravity is. Our findings are as follow. Firstly, the omission of bilateral tariff rates seems not to be so serious in terms of omitted-variable biases because the coefficients for the usual gravity variables do not change before or after their inclusion. Secondly, while the widely-used dummy variable of regional trade agreement could not play an alternative role in place of tariff rates, the inclusion of time-invariant pair fixed effects in addition to the time-variant importer fixed effects and exporter fixed effects accounts for the omission of tariff rates. The inclusion of those fixed effects makes the coefficient for bilateral tariff rates insignificant.
Journal of the Japanese and International Economies 03/2013; 27. · 0.40 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: This paper examines and compares the location choice of Japanese and Taiwanese MNEs in China. Furthermore, we investigate the relationship between location choice and firm characteristics, specifically firms' productivity. Due to Taiwan's linguistic and cultural advantages in China, it is expected that the location choice mechanics are different between Japanese and Taiwanese MNEs. As a result, our main findings are that, while the less productive Japanese firms prefer a location in an area with a larger agglomeration of Japanese affiliates or in an area closer to Japan, the more productive Taiwanese firms prefer a location in an area with a larger agglomeration of Taiwanese affiliates or in an area closer to Taiwan.
Papers in Regional Science 02/2013; · 1.43 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: There is a large and growing empirical literature that investigates the determinants of outward foreign direct investment (FDI). This literature examines primarily the effect of host country characteristics on FDI even though home country characteristics also influence the decision of firms to invest abroad. In this paper, we examine the role of both host and home country characteristics in FDI. To do so, we constructed a firm-level database of outward FDI from Japan, Korea, and Taiwan. Our empirical analysis yields two main findings. First, host countries with better environment for FDI, in terms of larger market size, smaller fixed entry costs, and lower wages, attract more foreign investors. Second, firms from home countries with higher wages are more likely to invest abroad. An interesting and significant policy implication of our empirical evidence is that policymakers seeking to promote FDI inflows should prioritize countries with higher wages.
Global Economic Review 01/2013; · 0.20 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: Recent empirical studies which utilize plant- or establishment-level data to examine globalization's impact on productivity have discovered many causal mechanisms involved in globalization's impact on firms' productivity. Since these pathways have been broad, there have been few attempts to summarize the several and detailed mechanisms of self-selection and learning at the same time. This paper examines seven pathways so that the clear-cut consequences of the broad picture of globalization become visible. This strategy is useful for detecting missing links within and across the existing studies as well as for finding possible synergy effects among different mechanisms. Insightful policy implications may be derived from the comprehensive comparisons between the seven different pathways of globalization.
Journal of Economic Surveys 04/2012; · 1.33 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: In this paper we statistically test the validity of the mechanics of complex VFDI in Japanese machinery FDI to East Asia; we do this by estimating a multiple-spatial lag model. From the theoretical point of view, in complex VFDI, the production activity of affiliates in a given country is positively related to that in neighboring countries which have large differences in factor prices with the given country. Our empirical results show that such mechanics of complex VFDI work in Japanese FDI to East Asia, and that they work more strongly in the MNEs with higher productivity. These results have an important implication for the policies of developing countries in attracting FDI.
[Show abstract][Hide abstract] ABSTRACT: In this paper, we aim to identify the political and financial risk components that matter most for the activities of multinational corporations. Our paper is the first paper to comprehensively examine the impact of various components of not only political risk but also financial risk on inward FDI, from both long-run and short-run perspectives. Using a sample of 93 countries (including 60 developing countries) for the period 1985-2007, we find that among the political risk components, government stability, socioeconomic conditions, investment profile, internal conflict, external conflict, corruption, religious tensions, democratic accountability, and ethnic tensions have a close association with FDI flows. In particular, socioeconomic conditions, investment profile, and external conflict appear to be the most influential components of political risk in attracting foreign investment. Among the financial risk components, only exchange rate stability yields statistically significant positive coefficients when estimated only for developing countries. In contrast, current account as a percentage of exports of goods and services, foreign debt as a percentage of GDP, net international liquidity as the number of months of import cover, and current account as a percentage of GDP yield negative coefficients in some specifications. Thus, multinationals do not seem to consider seriously the financial risk of the host country.
The Developing Economies 03/2011; 51(1). · 0.15 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: Inspired by the observed contrasting patterns of geographical distribution of the electric machinery industry in East Asia and Europe, this paper conducts an empirical clarification of the difference in spatial relationships in industry sizes among countries within a region by use of spatial econometric techniques. The results indicate that, while the size of the electric machinery industry in a country is positively correlated with that of neighboring countries in East Asia, there is no significant spatial correlation in Europe. Such a difference in spatial interdependence has important implications for economic development in those regions.
The Developing Economies 01/2011; 49(4):363-381. · 0.15 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: In this paper, we examined back-and-forth international transactions through tariff reduction by estimating modified gravity equations for finished goods and intermediate goods separately. Our main findings are as follows. Exports of finished machinery products are negatively associated with not only the importer's tariff rates on finished machinery products but also the exporter's tariff rates on machinery parts. Similarly, exports of machinery parts are negatively associated with not only the importer's tariff rates on machinery parts but also the exporter's tariff rates on finished machinery products. These results imply that tariff reduction in only one production process in an industry has the potential to drastically change the magnitude of trade in the whole industry.
International Economics and Economic Policy 01/2011; 11(3).
[Show abstract][Hide abstract] ABSTRACT: We examine transport modal decision by multinational firms to shed light on the role of freight logistics in multinational activity. Using a firm-level survey in Southeast Asia, we show that foreign ownership has a significantly positive and quantitatively large impact on the likelihood that air/sea transportation is chosen relative to truck shipping. This result is robust to the shipping distance, cross-border freight, and transport infrastructure. Both foreign-owned exporters and importers also tend to use air/sea transportation. Thus, our analysis presents a new distinction between multinational and domestic firms in their decision over transport modes.
[Show abstract][Hide abstract] ABSTRACT: In this paper, by employing the threshold regression method, we estimate the average tariff equivalent of fixed costs for the use of a free trade agreement (FTA) among all existing FTAs in the world. It is estimated to be 3.2%. This global estimate serves as a reference rate in the evaluation of each FTA’s fixed costs.
[Show abstract][Hide abstract] ABSTRACT: Inspired by the observed contrasting patterns of geographical distribution of the electric machinery industry in East Asia and Europe, this paper conducts an empirical clarification of the difference in spatial relationships in the industry sizes among countries within a region by use of spatial econometric technique. The results indicate that, while the size of the electric machinery industry in a country is positively correlated with that of neighboring countries in East Asia, there is no significant spatial correlation in Europe. Such a difference in spatial interdependence has important implications for economic development in those regions.
[Show abstract][Hide abstract] ABSTRACT: Inspired by the observed contrasting patterns of industrial distribution in East Asia and Europe, this paper conducts an empirical clarification of the difference in spatial relationships among countries within a region for the electric machinery industry by use of spatial econometric analysis. The results indicate that, while production in the electric machinery industry in a country is positively correlated with that of neighboring countries in East Asia, there is no significant spatial correlation in Europe. Such a difference in spatial interdependence has important implications for economic development in those regions.
[Show abstract][Hide abstract] ABSTRACT: Focusing on firms from the electrical machinery and electronics industry, this paper investigates the impact of foreign direct investment (FDI) on home productivity using activity-level data rather than, as most previous studies have done, firm-level data. Distinguishing between horizontal and vertical FDI (HFDI and VFDI), it is argued that VFDI changes the activities that firms are engaged in at home after the relocation of production, altering firmsfproduction function. This means that a direct comparison of productivity at the firm-level before and after the relocation of production is inappropriate. Instead, in order to assess the impact of FDI on home productivity, it is necessary to use activity-level data. Doing so, we obtain results that are consistent with theoretical predictions: HFDI does not necessarily have a significant positive effect on home productivity in activities that parallel those conducted by affiliates abroad. On the other hand, VFDI significantly enhances productivity in activities that have an input-output relationship with the activity relocated abroad.
Keio/Kyoto Joint Global COE Program, Keio/Kyoto Joint Global COE Discussion Paper Series. 01/2009;
[Show abstract][Hide abstract] ABSTRACT: It is noted that utilization of ASEAN Free Trade Agreements (FTAs) is low by international standards. In order to clarify the reasons for such low utilization, this paper investigates what kinds of Japanese affiliates in ASEAN are more likely to use FTAs in their exporting, by employing unique affiliate-level data. Our findings are as follows. First, the larger the affiliate is, or the more diversified the origins of its procurements, the more likely it is to utilize an FTA scheme in its exporting. Second, affiliates that export actively to countries with higher general tariffs are more likely to use FTAs. Third, there are clear differences in FTA utilization depending affiliates’ locations and sectors.
Asian Economic Journal 01/2009; · 0.30 Impact Factor