Experimenting with Contests for Experimentation

We report an experimental test of alternative rules in innovation contests when success may not be feasible and contestants may learn from each other. Following Halac, Kartik, and Liu (in press), the contest designer can vary the prize allocation rule from Winner‐Take‐All (WTA) in which the first successful innovator receives the entire prize to Shared in which all successful innovators during the contest duration share in the prize. The designer can also vary the information disclosure policy from Public in which at each period, all information about contestants' past successes and failures is publicly available, to Private, in which contestants only know their own histories. In our setting, the optimal contest design in terms of maximizing the probability that at least one innovator is successful depends on the probability of successful innovation, given that innovation is feasible. Under some parameters the designer will prefer a WTA‐Public contest; while, under others he will prefer Shared‐Private. Our experiments provide evidence that Private disclosure contests behaviorally dominate Public disclosure, regardless of the prize allocation rule, and moreover that Shared‐Private contests dominate WTA‐Private contests.     

Is China's FDI coming at the expense of other countries?

We analyze how China's emergence as a destination for foreign direct investment is affecting the ability of other countries to attract FDI, using an approach that accounts for the endogeneity of China's FDI. Results suggest that China's rapid growth and attractions as a destination for FDI also encourages FDI flows to other Asian countries, as if producers in these economies belong to a common supply chain. There is also evidence of FDI diversion from OECD recipients. We interpret this in terms of FDI motivated by the desire to produce close to the market where the final sale takes place. Firms more inclined to invest in China for this reason are correspondingly less inclined to invest in the OECD. A detailed analysis of Japanese foreign direct investment outflows disaggregated by sector further supports these conclusions. J. Japanese Int. Economies 21 (2) (2007) 153–172.     

The transmission mechanism of monetary policy in Japan: Evidence from banks' balance sheets

We examine how banks' responses to monetary policy vary according to their balance sheet using Japanese bank data from 1975 to 1999. We find that the effect of monetary policy on lending is stronger for banks that are smaller, less liquid, and more abundant with capital. The effects of bank balance sheet on monetary transmission are different by bank types, policy stances and borrowers' industries. Our results imply that a lending channel of monetary transmission exists, that the effect of expansionary monetary policy is attenuated if banks' capital is scarce, and that the effect of monetary policy on the allocation of funds depends on banks' balance sheets. J. Japanese Int. Economies 20 (3) (2006) 380–405.     

Promoting Imports to Appease Trade Partners: Japan's New Trade Policies

This paper documents and analyzes Japan's various import promotion policies. Appeasing Japan's trade partners, particularly the United States, seems to be a major goal of these policies. The import promotion efforts are best described as lowering the fixed costs of entry into the Japanese market or lowering the switching costs involved in switching from a domestic supplier to a foreign one. Various models of the policies are discussed along with their different predictions as to the effects of the policies. J. Japan. Int. Econ., September 2001, 15(3), pp. 253–270. Department of Economics, University of Hawaii at Manoa, 2424 Maile Way, SSB 542, Honolulu, Hawaii 96822. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: F13, F14.     

Sequential formation of alliances in survival contests

We consider a sequential formation of alliances à la Bloch (1996) and Okada (1996), followed by a two‐stage contest in which alliances first compete with each other, and then the members in the winning alliance compete again for an indivisible prize. In contrast to Konishi and Pan (2019a), which adopted an open‐membership game as the alliance formation process, alliances are allowed to limit their memberships (excludable alliances). We show that if members’ efforts are strongly complementary to each other, there will be exactly two asymmetric alliances: the larger alliance is formed first and then the remaining players form the smaller one. This result contrasts with the one under open membership, where moderate complementarity is necessary to support a two‐alliance structure. It is also in stark contrast with Bloch, Sánchez‐Pagés, and Soubeyran (2006), which shows that a grand coalition is formed in the same game if the prize is divisible and a binding contract can be used to avoid further conflicts after an alliance wins the prize.     

Long-Run Relationship between Consumption and Income in Japan: Tests of the Deterministic Cointegration Restriction

This paper reexamines two versions of the permanent income hypothesis derived from R. E. Hall (1978, J. Polit. Econ.86, 971–987) and R. G. King, C. L. Plosser, J. H. Stock, and M. W. Watson (1991, Amer. Econ. Rev.81, 819–840) using Japanese quarterly data. The main focus is on the relationship between stochastic and deterministic trends of consumption and income. It is found that the deterministic cointegration restriction implied by the two models is strongly rejected in Japan in contrast to the U.S. result, and the rejection of King et al.'s model depends on the existence of a trend break. This finding suggests that the postwar Japanese economy experienced the change in a steady state path considered by the neoclassical growth model. J. Japan. Int. Econ., June 2002, 16(2) pp. 253–278. Graduate School of Economics, Hitotsubashi University, 2-1 Naka Kunitachi, Tokyo 186-8601, Japan. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: C32, E21.     

Are Corporate Financing Decisions Different in Japan? An Empirical Study on Capital Structure

This paper investigates empirically how Japanese firms determine capital structure. I show that a firm's capital structure in Japan can be explained, to some extent, by real factors derived from theories of the capital structure. I also find remarkable results showing that the capital structure of Japanese firms is substantially affected by the institutional and regulatory characteristics of Japanese capital markets. Therefore, I conclude that both real and institutional factors are important determinants of corporate financing decisions in Japan. This result indicates that it is necessary to consider both theories and institutional features in each country to fully understand a firm's capital structure choice. J. Japan. Int. Econ., September 1999, 13(3), pp. 201–229. School of Commerce, Waseda University, 1-6-1, Nishiwaseda, Shinjuku-ku, Tokyo, 169-8050, Japan. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: G15, G32, G38.     

The impact of technology transfer and R & D on productivity growth in Taiwanese industry: Microeconometric analysis using plant and firm-level data

This paper conducts a comparative empirical analysis of the impact of R & D spending and purchases of foreign technology on output and productivity in Taiwanese industry. We employ data from two different sources, providing an econometric perspective on this question at two different levels of aggregation. We first conduct empirical analysis using data from the Taiwanese government's industrial census of technological activities at the plant level. This study is, to the best of our knowledge, the first empirical analysis using these data. We complement these results with analyses of data at the firm level. The results of our regression analyses generally support the conclusion that both R & D spending and purchases of foreign technology have contributed positively to Taiwanese productivity growth. J. Japanese Int. Economies 20 (2) (2006) 177–192.     

New Goods, Market Formations, and Pitfalls of System Design

The standard practice in economic theory is to assume that all the relevant variables (e.g., the space of all the goods of potential economic value) and all the relevant constraints are known to the policymaker or to the designer of an economic system. This often unstated assumption (or the belief implicitly embodied in it) inadvertently creates an illusion about our ability to design an economic system and control process of resource allocation. In this paper, a series of examples is developed to illustrate that this modeling approach has the danger of misdirecting our attention when evaluating alternative forms of an economic system. Some implications for reforms in the former socialist economies are also drawn. J. Japan. Int. Econ., December 1995, 9(4), pp. 376–402. Department of Economics, Northwestern University, Evanston, Illinois 60208; NBER; and TCER.     

The JEC Revisited: Did Debt Undermine Stability?

The Joint Executive Committee (JEC), one of the most studied cartels in all of economics, was at best partially successful at maintaining collusion. The railroad cartel faced frequent breakdowns and re-contracting efforts. This paper considers the effects that large capital debt may have had on the members of the JEC. The JEC is compared to the express cartel of the period in which all firms were creditors. The latter had no breakdowns during the same period. It is shown through a small modification in an oligopolistic supergame that debt-burdened firms are less likely to maintain a stable cartel agreement than a cartel of creditors, a result that is consistent with the experience of these two cartels.

Does International Diversification Really Diversify Risks?

This paper demonstrates that large adverse shocks are more highly correlated with one another than positive shocks across national stock markets of industrialized economies. This finding is robust if we allow for an ARCH process or if we exclude the data of October 1987. It is shown that the negative skewness of the world market portfolio is primarily responsible for such time-varying correlations of national stock markets. We propose to model the world market portfolio return by using the extended QGARCH model of J. Y. Campbell and L. Hentschel (1992, J. Finan. Econ.31, 281–318). The finding suggests that the U.S. investors' benefit from international portfolio diversification could be far more limited than is commonly thought. J. Japan. Int. Econ., March 2002, 16(1) pp. 109–134. Institute of Economic Research, Hitotsubashi University, Kunitachi-city, Tokyo 186–8603, Japan; and Institute of Policy and Planning Sciences, University of Tsukuba, Tsukuba, Japan. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: F30, G11, G15.     

Measuring the Liquidity Effect: The Case of Japan

In this paper, we measure the liquidity effect in Japan, complementing the work done by F. Hayashi (2001, Int. Econ. Rev.42, 287–316) and compare it to the liquidity effect in the United States. Since institutional features are similar across these two countries, we apply J. Hamilton's (1997, Amer. Econ. Rev.87, 80–97; 1998, Carnegie-Rochester Conf. Ser. Public Pol. 49, 1–44) methodology to estimate the liquidity effect for each day of the maintenance period. Detailed daily data supplied by the Bank of Japan enable us to obtain more accurate estimates for Japan. Our key findings, which are not found in F. Hayashi (2001, Int. Econ. Rev.42, 287–316) are as follows: (1) On the final day of a reserve maintenance period, both countries show the strongest evidence of the liquidity effect, and (2) in both countries the liquidity effect tends to be larger and more statistically significant toward the end of the period. J. Japan. Int. Econ., September 2002, 16(3), pp. 289–316. Ministry of Economy, Trade and Industry, 1-3-1 Kasumigaseki, Chiyoda-ku, Tokyo 100-8901, Japan. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: E43, E44, E52.     

Impact of exchange rate volatility on Indonesia's trade performance in the 1990s

Whether a real devaluation ultimately proves to be expansionary or contractionary depends on whether the boost given to the exportables sector offsets any possible output-depressing effects that may accompany the expenditure-switching policy. Failure of the exportables sector to adequately respond to the price incentives is a virtual guarantee that devaluation will be contractionary. This appears to have been the experience of Indonesia, the country worst hit by the crisis of 1997–1998. This paper explores whether the increased exchange rate variability of the Indonesian rupiah post 1997 may have been a cause for the country's poor export performance. J. Japanese Int. Economies 18 (2) (2004) 218–240.     

On the Determinants of Career Interruption by Childbirth among Married Women in Japan

The purpose of this paper is to investigate determinants of job continuity across childbirth for married women in Japan. We use data from the Statistical Bureau's 1992Employment Status Surveyon nearly 8000 married women who were employed right before childbirth. Our estimation and simulation results suggest that education and access to child care are important determinants for a married woman to continue her work across childbirth, while high wages and short working hours help her to continue to work but are less important determinants. Also, the estimation result suggests that diversified working environments across industries and firm sizes possibly influence women's decisions.J. Japan. Int. Econ., March 1999,13(1), pp. 73–89. Tokyo Metropolitan University, Department of Economics, Hachioji, Tokyo 192-03, Japan; and University of Tsukuba, Institute of Policy and Planning Sciences, 1-1-1 Tennodai, Tsukuba, Ibaraki 305-8573, Japan.Copyright 1999 Academic Press.Journal of Economic LiteratureClassification Numbers: J22.     

Why Are There Rich and Poor Countries? Symmetry Breaking in the World Economy: A Note

This paper extends K. Matsuyama (1996, Journal of the Japanese and International Economies, 10, 419–439) to allow for the presence of a fixed factor such as land. By assuming that agricultural production is more land-intensive than manufacturing production, we generalized Matsuyama's results on symmetry breaking in the world economy. That is, international trade by causing an agglomeration of economic activities in different countries of the world makes inevitable the coexistence of rich and poor. J. Japan. Int. Econ. June 1999, 13(2), pp. 140–149. Department of Economics, Tufts University, Medford, Massachusetts 02155. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: F12 and O12.     

Sibling Rivalry and Strategic Parental Transfers

This paper develops a noncooperative Nash model in which two siblings compete for their parents' financial transfers. Treating sibling rivalry as a “rent-seeking contest” and using a Tullock-Skaperdas contest success function, we derive the conditions under which more financial resources are transferred to the sibling with lower earnings. We find that parental transfers are compensatory and that the family as an institution serves as an “income equalizer.” Within a sequential game framework, we characterize the endogeneity of parental transfers and link it to parents' income, altruism, and children's supply of merit goods (e.g., parent-child companionship or child services). We show that merit goods are subject to a “moral hazard” problem from the parents' perspective.     

International reserves management and capital mobility in a volatile world: Policy considerations and a case study of Korea

This paper characterizes the precautionary demand for international reserves driven by the attempt to reduce the incidence of costly output decline induced by sudden reversal of short-term capital flows. It validates the main predictions of the precautionary approach by investigating changes in the patterns of international reserves in Korea in the aftermath of the 1997–1998 crisis. This crisis provides an interesting case study, especially because of the rapid rise in Korea's financial integration in the aftermath of the East Asian crisis, where foreigners' shareholding has increased to 40% of total Korean market capitalization. We show that the crisis led to structural change in the hoarding of international reserves, and that the Korean monetary authority gives much greater attention to a broader notion of ‘hot money,’ inclusive of short-term debt and foreigners' shareholding. J. Japanese Int. Economies 21 (1) (2007) 1–15.     

The Rocky Road to Implementation of Basel II in the United States

This paper contends that the problems US officials have encountered in their efforts to implement Basel II reflect inherent weaknesses in the structure of the approach. It begins with a brief overview of the original Basel Accord on Capital Adequacy (Basel I) and a summary of the Basel II approach, with emphasis on the Pillar I weights for credit risk. Next an analysis of the Fed’s bifurcated approach to implementation of Basel II is followed by an examination of three unanticipated obstacles: (1) perceived competitive inequities within the USA; (2) the surprisingly lower and variable capital charges revealed in the fourth quantitative impact study; and (3) the request by four leading banks for permission to implement the simpler, Standardized Approach rather than the Advanced Internal Ratings Approach (A-IRB). These reflect the erosion of several crucial predeal understandings as described by Kane (J Financ Serv Res 32(1):39–53, 2007a). The paper concludes with a consideration of whether it may have been possible to achieve equivalent improvements in risk management with lower compliance costs and less uncertainty about the impact on financial stability.

Part-time workers doing full-time work in Japan

This paper is concerned with the phenomenon of part-time workers performing similar types of jobs to full-time workers in the same workplace. We use data from Japan's Survey on Diversified Types of Employment to answer two questions. First, why are firms increasingly employing part-time workers in jobs traditionally offered to full-time workers? Second, what are the characteristics of the workers taking these jobs? As for the former, it is primarily service sector firms using this new work relationship. Interestingly, there is evidence that manufacturing firms are outsourcing in lieu of hiring domestic part-time workers. On a positive note, we find evidence that part-time workers are screened by firms for full-time jobs. As to the second question, the workers are primarily professionals working long hours. As an aside, based on our data we find no evidence that part-time workers are more likely to be involuntarily employed in full-time jobs than in non full-time jobs. J. Japanese Int. Economies 21 (4) (2007) 435–454.     

Impacts of the information-technology revolution on Japanese manufacturer–supplier relationships

“Vertical keiretsu,” characterized by suppliers' willingness to make customized investments, their long-term relationships with manufacturers and financial as well as personal ties between them, had been recognized as an important source of strength in Japanese industries. Our model predicts that, in contrast to the recent popular argument, the information-technology revolution can strengthen several aspects of “vertical keiretsu.” This is because the efficiency of designing customized parts can be significantly enhanced by suppliers' IT investments such as the introduction of 3D CAD systems. Our interviews with Japanese manufacturers provide a support to this prediction. J. Japanese Int. Economies 18 (3) (2004) 390–415.