Policy Reversals and Electoral Competition with Privately Informed Parties

We develop a spatial model of competition between two policy-motivated parties. The parties know which policies are desirable for voters, while voters do not. The announced positions of the parties serve as signals to the voters concerning the parties' private information. In all separating equilibria, when the left-wing party attains power, the policies it implements are to the right of the policies implemented by the right-wing party when it attains power. Intuitively, when right-wing policies become more attractive, the left party moves toward the right in order to be assured of winning, while the right-wing party stays put in a radical stance.     

Trade liberalization in a differentiated duopoly reconsidered

Constructing a model of differentiated Cournot duopoly, we consider welfare effects of trade liberalization (i.e. reductions in transport costs). We examine both multilateral trade (i.e. the firms in both countries export bilaterally) and unilateral trade, under which foreign entry is possible but the home firm cannot export. Some new results on trade gains under differentiated oligopoly are proved and their implications are discussed.     

Accounting year-end dispersion and seasonality in the Japanese corporate bond market

Using monthly yield data on straight bonds, this article investigates seasonality in the Japanese corporate bond market. A statistical examination of spreads between the yield of each bond and a bond market index reveals that the yield spread consistently decreases from April to August, whereas it increases from September to December. Because accounting year-ends for most investors in Japan are concentrated in either March or December, this seasonality supports the hypotheses of tax-loss selling and window dressing. Moreover, the seasonality becomes more pronounced as the debt rating declines, consistent with the findings in previous studies investigating the US bond market.     

Chronic Deflation in Japan

Japan has suffered from a long‐lasting but mild deflation since the latter half of the 1990s. Estimates of a standard Phillips curve indicate that a decline in inflation expectations, the negative output gap, and other factors such as a decline in import prices and a higher exchange rate all account for some of this development. These factors, in turn, reflect various underlying structural features of the Japanese economy. This paper examines a long list of these structural features that may explain Japan's chronic deflation, including the zero lower bound on the nominal interest rate, public attitudes toward the price level, central bank communication, weaker growth expectations coupled with declining potential growth or the lower natural rate of interest, risk‐averse banking behavior, deregulation, and the rise of emerging economies.     

Does free trade promote environmental technology transfer?

We investigate how environmental and trade policies affect the transfer of environmental technology in a two-country model with global pollution. By comparing free trade and tariff policy with or without commitment, the following results are obtained. First, firms avoid the implementation of environmental tax by contracting technological transfer. Second, there is a case in which free trade is preferable to a tariff policy for both countries when there is no commitment to a tariff level. Third, free trade is not Pareto-preferred to a tariff policy when there is a commitment.     

Dynamic Interactions in Trade Policy in a Differential Game Model of Tariff Protection

This paper develops a two‐country dynamic game model of tariff protection to reconsider optimal trade policies and their implications for welfare. The authors show that an import subsidy is optimal in the feedback Nash equilibria, which results in a curious possibility that the domestic market is monopolized by the foreign firrm. However, welfare comparisons among Nash equilibria, free trade, and autarky reveal that feedback Nash equilibria involve higher welfare than both autarky and free trade, i.e. dynamic noncooperative choices of policy serve as tacit policy coordination and ensure larger trade gains relative to free trade.     

A framework for estimating willingness-to-pay to avoid endogenous environmental risks

This paper proposes a general empirical strategy to estimate willingness-to-pay (WTP) for exogenous risk mitigation when environmental risks are endogenous in protective actions and consumers are imperfectly informed about the ambient risk levels. The strategy consists of a set of survey techniques and the dummy endogenous variable model (Heckman, 1978) to control for correlation in unobserved errors that enter the WTP equation and the protection-decision equation. The method is applied to the non-market valuation survey data on arsenic contamination in drinking water. Our results indicate that the estimated WTPs are significantly higher for households without self-protective action. Our approach thus offers not only the correct welfare estimate for exogenous reduction of environmental risks, but also yields policy implications qualitatively much different from the conventional approach. We also estimate the welfare value of the policy to inform and educate the public about the arsenic risk simultaneously with public risk mitigation. The estimated welfare value is similar to, though slightly higher than, that of risk mitigation without information component. This occurs due to the competing effects of information dissemination and risk mitigation efforts.     

Factors determining residents’ preparedness for floods in modern megalopolises: the case of the Tokai flood disaster in Japan

This study examines how flood risk perception and home ownership affect residents’ preparedness for floods, focusing specifically on the case of the Tokai flood disaster in Nagoya City, one of Japan’s biggest metropolises, in 2000. The greatest rainfall ever recorded in Nagoya City (566.5 mm) occurred on 11–12 September 2000; as a result, a local river burst its banks and flooded the city. A survey was conducted of residents of the affected area in Nagoya City and its adjacent region. The respondents were asked to rate the extent of their experience with, anticipation of, and preparedness for floods before and after the Tokai disaster in terms of taking special measures against floods. The results showed that the degree of preparedness for floods was determined by the level of fear of floods and the amount of damage sustained during the Tokai flood, especially for homeowners. However, the residents’ preparedness did not depend on their anticipation of floods. These findings show that preparedness for floods depends on ownership of a home, fear of flooding, and the amount of damage from previous floods rather than on previous experience with and anticipation of floods.     

A trade and domestic tax reform in imperfectly competitive markets

This paper develops a model of an export oligopoly to examine the welfare effects of an export tax reduction and a production tax increase that makes the foreign country no-worse off. Whether or not entry into the oligopolistic industry is free, the proposed policy reform is shown to reduce welfare of the policy-implementing country and the world. Relating this result to the perfectly competitive case, we closely discuss its implications.     

The Continuity of the Transaction Relationship Between a Bank and a Borrower

This paper analyses the influence of the number of past transactions on the continuity of the transaction relationship between a bank and a borrower. It is shown that banks, in deciding whether or not to maintain a transaction relationship with a borrower, fall into one of two categories: if the average of past returns from borrowers is equal, either a bank is more likely to maintain transaction relationships with those whose number of past transactions is larger, or it is indifferent to the number of past transactions. This result holds whether the bank is risk-averse or risk-neutral.
JEL Classification number: G21.