Monopolistic Competition, Increasing Returns and International Coordination of Entry Policy

This paper presents a new model of monopolistic competition in which firms produce differentiated products under decreasing costs. This model is used to confirm and illustrate the limitations of the excess entry hypothesis, well known in the literature on industrial organization. The validity of the theorem is limited in the sense that it fails to hold in the present model if the properly defined degree of love for variety is sufficiently large. The model is extended to allow for intraindustry trade and to examine the conditions for gains (or losses) from trade in a two-country framework. It is shown how the degree of love for variety affects them. The significance and nature of international coordination of competition policy in the present setting is considered. The degree of love for variety is again shown to be of crucial importance in the characterization of the optimal policy coordination.     

THE ECONOMIC EFFECT OF HIGHWAY CONSTRUCTION: A COMPARATIVE ANALYSIS FOR THE U.K., GERMANY AND JAPAN

This paper attempts to estimate the marginal productivity of highway construction in the U.K., Germany and Japan during the 15 years following the first oil crisis. In addition, highway-improvement policy in Japan is evaluated using a simple macro-economic regression model. The following conclusions were obtained: in every country the marginal productivity of highway construction decreased over the period 1975-85, with the decrease most pronounced in Japan; subsequently, it increased slowly in the U.K. and Germany, with Japan leveling off though still having the highest value among the three countries; the U.K. maintained a high level of highway productivity largely as a result of a high degree of utilization. There is scope in Japan for attaining a higher level (approximately equal to that of the late 1970s) if the extent of highway utilization can be maintained by additional construction. This implies that future highway-construction policy should be of efficiency-seeking nature.     

ENTRY AND EXIT OF FIRMS AND UNDEREMPLOYMENT EQUILIBRIUM

This paper extends the standard Keynesian model of aggregate demand and supply allowing for imperfect competition, variable returns to scale, and entry and exit of firms. It distinguishes three phases of macroeconomic equilibria, stagnant, expansive and contractive, according to whether the number of firms is fixed or endogenously determined by the position of the aggregate demand curve. Using this model we show that a large shift in the aggregate demand affects the structure of the economy irreversibly and that the real wage or labor productivity may move procyclically rather than anticyclically. We also elucidate the asymmetric effects of fiscal and monetary policies on the entry of firms and employment.     

Market, Trade and Welfare in General Equilibrium

This paper develops a tractable general equilibrium model of an economy with an arbitrary number of industries under increasing returns to scale and imperfect competition. The market structure of the model economy is expressed by two basic sets of parameters: the degree of competition, and the markup ratio prevailing in each industry. The government is supposed to control the degree of competition through antitrust policy and the markup ratio through entry policy. Using this model, I re-examine the results of traditional competitive equilibrium analysis and explore the effects of competition policies on economic welfare and international trade.
JEL Classification Numbers: D43, D50, F11, F12, L13, L41.     

On the sharing of trade gains by resource-poor and resource-rich countries

A model of an asymmetric world composed of resource-poor and resource-rich countries. The scopes of ‘economic imperialism’ and ‘resource nationalism’ are then examined. It is shown that self-seeking resource-poor countries will completely exploit their resource-rich trading partners but that the latter will exploit the former only partially.     

The gain from free trade under conditions of uncertainty

It is argued that recent attempts to demonstrate that free trade may be harmful under some kinds of uncertainty are based on implausible assumptions. It is shown also that standard proofs of the gainfulness of free trade can be adapted to accommodate uncertainty.