PARTIAL PRIVATIZATION, TECHNOLOGY SPILLOVERS, AND FOREIGN OWNERSHIP RESTRICTION

Using a mixed oligopoly model with foreign ownership, this paper examines the interaction between two market-opening policies: the relaxation of foreign ownership restriction and the privatization of domestic public firms. It particularly focuses on technology spillovers, which could be one of the most prominent motivations for introducing foreign investment into a domestic market. The first result demonstrates that the optimal level of privatization is affected by technology spillovers from foreign investment and is negatively related with the magnitude of technology spillovers. The second result shows that the optimal level of privatization is lower when foreign ownership restriction is abolished than that when foreign ownership is not fully allowed. The third result indicates that the government relaxes regulations on foreign ownership of domestic firms only if the magnitude of technology spillovers is significant.     

Investigating Donating Behavior Using Hypothetical Dictator Game Experiments

We conduct dictator game experiments to investigate donating behavior by simultaneously examining the time delay when the donee receives the donation and the individual characteristics of the donor. We show that donations decrease as the time delay rises and that gender, education level, neuroticism, agreeableness, conscientiousness, and utilitarianism affect donations independent of the time delay.     

Why Are Concavity Conditions Not Satisfied in the Cost Function? The Case of Japanese Manufacturing Firms during the Bubble Period*

This paper examines empirically the reasons why Japanese manufacturing firms frequently fail to satisfy concavity of the cost function in input prices. We focus on the ‘bubble period’ in the 1980s when land was in great demand and land prices soared. By estimating the translog cost function with land as one of production inputs, we find that violation of concavity mainly resulted from weak bank–firm relationship and massive transactions of land. We also demonstrate that elasticities of substitution between land and other inputs are estimated quite differently if the firms violating concavity are not excluded from the analysis.     

The structure of Nash equilibrium tariffs

This paper examines theoretically the structure of optimal (Nash equilibrium) tariff rates in a two-country economy with more than two traded goods. We provide a condition under which the equilibrium tariff rates are uniform in both countries, and explore the relative size of the equilibrium tariff rates in each country when the uniform tariff condition is not satisfied. The elasticities of compensated excess demand for goods play an important role in characterizing the structure of the equilibrium tariff rates. This paper undertakes the analysis using a dual approach.     

Inertia in the key currency

This paper empirically analyzes inertia in the position of the dollar as the key currency. We extend a money-in-the-utility model to one with parallel international currencies. We use an extended model to estimate a parameter in the utility function. Also, given the estimated parameter, we simulate a relation between depreciation and share of the dollar. The result indicates that the share of the dollar will not decrease even if the dollar depreciates at a moderate rate. Thus the dollar will keep its position as the key currency – inertia works in the key currency.     

Allocation of authority under central grants

This study deals with an analysis of allocation of government authority between local and central governments. Using a relatively simple model, we examine three classes of issues: First, what type of public project is implemented under a (de)centralized system? Second, is the size of governments (or public projects) larger or smaller when the system is (de)centralized? Third, should the system be (de)centralized? Which level of government should be allocated an authority? The most interesting result of the analysis is that the optimal allocation of authority varies with the cost differential between local and central government in a non-monotonic way.     

The Welfare Effects of Differential Tariff Rates

This paper considers a two-country, three-good economy in which one country imposes tariffs on import goods at a uniform rate, while the other country engages in free trade. In such an economy, we examine the welfare effects of changing tariff rates toward differential tariffs from uniform tariffs.     

Market Valuation and the q Theory of Investment

This study re-evaluates the role of the stock market in Japanese corporate investment decisions based on time-series data. Employing the time-series technique, we examine why the performance of Tobin's average q -type investment function is poor. We construct a series of average q and another of marginal q (a more fundamental profitability measure of investment) and investigate the relationship between the two. A cointegrating relationship is not detected between the two measures, both of which have a unit root. The divergence of average q from marginal q is not narrowed even if the imperfect competition of the output market is taken into consideration. We also examine which q measure is more relevant to Japanese corporate investment decisions by estimating separately the investment function with two measures of q as an explanatory variable. The estimation results show that entrepreneurs place more emphasis on marginal q than on average q in investment decisions.
JEL Classification Number: E22.     

Can margin traders predict future stock returns in Japan?

A growing body of literature suggests that investor sentiment affects stock prices both at the firm level and at the market level. This study examines the relationship between investor behavior and stock returns focusing on Japanese margin transactions using weekly data from 1994 to 2003. Margin trading is dominated by individual investors in Japan. In analysis at the firm level, we find a significant cross-sectional relationship between margin buying and stock returns. Both market-level and firm-level analyses show that margin buying traders follow herding behavior. They seem to follow positive feedback trading behavior for small-firm stocks and negative feedback trading behavior for large firm stocks. Our results show that information about margin buying helps predict future stock returns, especially for small-firm stocks at short horizons. The predictive power does not diminish even after controlling for firm size and liquidity.     

International capital market and repeated tax competition

We propose an infinitely repeated game of tax competition with an endogenous capital supply. Our results show that the larger the capital supply elasticity to interest rates, the easier it is for interregional tax coordination within a country to be achieved. The capital supply elasticity is lower when countries are less integrated into the international capital market, and vice versa. Thus, our finding suggests that the regions in the country with a lower (higher) degree of integration in the global market are less (more) likely to achieve tax coordination.