INTANGIBLE INVESTMENT IN JAPAN: MEASUREMENT AND CONTRIBUTION TO ECONOMIC GROWTH

Following the approach of Corrado, Hulten, and Sichel (2005, 2006 ), we measure intangible investment and examine the contribution of intangible capital to economic growth in Japan. We find that the ratio of intangible investment to GDP in Japan has risen during the past 20 years and now stands at 11.1 percent, which is lower than the ratio estimated for the U.S. in the early 2000s. The ratio of intangible to tangible investment in Japan is also lower than equivalent values estimated for the U.S. In addition, we find that, in stark contrast to the U.S., where intangible capital grew rapidly in the late 1990s, the growth rate of intangible capital in Japan declined from the late 1980s to the early 2000s. Our conclusions regarding intangible investment in Japan remain largely unchanged even if, using data with respect to firm-specific resources, we take on-the-job training into account.     

THE EFFECT OF KNOWLEDGE ACCESSIBILITY ON INTERNATIONAL INCOME INEQUALITY

Using a structural model of new economic geography, we estimate the effect of accessibility to foreign knowledge on international income distribution. Whereas previous literature has mainly focused on the importance of geographical accessibility to foreign markets, this paper emphasizes the role of accessibility to foreign knowledge in determining international income inequality. Using cross-country data of income per worker, bilateral trade flows, and number of flight passengers, we find evidence that the accessibility to foreign knowledge raises per capita income significantly.     

Examining consumers’ sensory experiences with color: A consumer neuroscience approach

This research advances neuroscience as a tool with which to study consumers’ visual mental imagery. Applying these methods, we suggest that the presence or absence of color is a critical dimension along which consumers’ visualizations can vary, and explore when and why color of visual mental imagery becomes more prominent. Using functional magnetic resonance imaging (fMRI), we find neural evidence for distinguishing black-and-white (BW) versus color visualization, and that visual mental imagery becomes increasingly monochrome (vs. colorful) when consumers imagine distant (vs. near) future events. Our neural evidence further suggests construal level as the underlying mechanism of this effect, showing common regions of activation for imagining distant future events, engaging in high-level construal, and forming BW mental imagery. We discuss the implication of these findings and the benefits of fMRI techniques for marketing in general.     

Regime switches in exchange rate volatility and uncovered interest parity

We use a regime-switching model to examine how exchange rate volatility is related to the failure of uncovered interest parity. Main findings are as follows. First, exchange rate returns are strongly influenced by regime switches in the relationship between the returns and interest rate differentials. Second, low-yielding currencies appreciate less frequently, but once it occurs, their movements are faster than when they depreciate. Third, depreciation of low-yielding currencies and low volatility are mutually dependent on each other. Finally, these three findings are more evident for shorter horizons. The second and third results are consistent with a market participants’ view: short-term carry trades in a low-volatility environment and their rapid unwinding substantially influence exchange rates. We consider the effects of funding liquidity to explain these results.     

What Should the Weights of the Three Major Currencies be in a Common Currency Basket in East Asia?*

We consider what type of regional common currency should be introduced in East Asia in the future. The common currency basket is, in itself, more desirable as an anchor currency. In this paper we define two types of currency basket and investigate the long‐term sustainability of adopting a common currency basket in East Asia. From our empirical results, a larger weight (but less than 100 percent) for the US dollar in the common currency basket tends to make bilateral exchange rates among East Asian countries stable in the long run.     

The Logic of the Survival of North Korea

Why has North Korea been able to survive up to now, while other rogue states such as Afghanistan and Iraq have suffered military intervention by the USA? To solve this puzzle, we present a simple two‐level game model that takes into account strategic interdependence between intrastate and interstate wars. Using the two‐level game framework, we show that the ethnic homogeneity of North Korea helps defend itself from US armed intervention, whereas a rogue state with a relatively heterogeneous society is expected to experience international insecurity by providing the USA with an opportunity to find domestic allies that help it win an interstate war against the rogue state. As a policy implication, we discuss the possibility that the recent development of a market economy in North Korea might destabilize the peace between the USA and North Korea.     

Measuring economic localization: Evidence from Japanese firm-level data

This paper examines location patterns of Japan’s manufacturing industries using a unique firm-level dataset on the geographic location of firms. Following the point-pattern approach proposed by Duranton and Overman (2005), we find the following. First, about half of Japan’s manufacturing industries can be classified as localized and the number of localized industries is largest for a distance level of 40 km or less. Second, several industries in the textile mill products sector are among the most localized, which is similar to findings for the UK, suggesting that there exist common factors across countries determining the concentration of industrial activities. Third, the distribution of distances between entrant (exiting) firms and remaining firms is, in most industries, not significantly different from a random distribution. These results suggest that most industries in Japan neither become more localized nor more dispersed over time and are in line with similar findings by Duranton and Overman (2008) for the UK. Fourth, a comparison with the service sector indicates that the share of localized industries is higher in manufacturing than in services, although the extent of localization among the most localized manufacturing industries is smaller than that among the most localized service industries, including financial service industries.     

Conservation Auctions and Compliance: Theory and Evidence from Laboratory Experiments

Many agri-environmental conservation programs are faced with the problem of imperfect monitoring. This provides farmers with an incentive for noncompliance, because they can receive subsidies without implementing the conservation scheme. In this paper, bidding behavior and auction performance are compared for discriminatory-price and uniform-price auctions in an imperfect monitoring environment. Our theoretical analysis suggests that auction performances are equalized between the discriminatory-price and uniform-price auctions. However, laboratory experiments reveal that, although the discriminatory-price auction has an advantage in terms of reducing policy costs, it is more likely to cause adverse selection. As a result, the uniform-price auction tends to have higher efficiency and cost-effectiveness when compliance behavior is taken into account.     

On uniqueness of the conditional maximum likelihood estimation for a binary panel model

This paper considers an estimation method for a binary panel model with incidental parameters as individual effects. The necessary condition for the conditional maximum likelihood approach proposed by Andersen (1970) is investigated and we show that unique sufficient statistics exist only for logit models in a two-wave panel.     

The expanding Empire and spatial distribution of economic activity: the case of Japan's colonization of Korea during the prewar period

In 1910, Japan annexed Korea and integrated it into the Empire of Japan. According to its policy of assimilating colonies, the Japanese government intended to remove the tariffs between Japan and Korea, an aim which had almost been realized by 1923. The removal of the tariff barrier was supposed to improve market access between Japan and Korea. This article explores the implications of this event, focusing on the spatial distribution of economic activity in Japan. The regression results suggest that the integration of the Korean market increased population growth rates more in the regions close to the former border between Japan and Korea than in the other regions. Furthermore, after integration, the regions close to Korea that specialized in the fabric industry, whose products were the primary goods exported from Japan to Korea, experienced more population growth than other regions close to Korea did. These results suggest that market accessibility was indeed a determinant of the spatial distribution of economic activity. Our findings also indicate that the economic effect of colonization on the mainland was spatially heterogeneous and that a spatial viewpoint of the history of imperialism is important.