Tax Effects in a Model of Product Differentiation: A Note

We investigate how unit (or specific) tax and ad valorem tax affect equilibrium location choice in a model of product differentiation, which includes Hotelling (linear-city) and Vickrey-Salop (circular-city) spatial models as special cases. We find that neither tax affects equilibrium location patterns as long as each firm has the same production cost. Two taxes can yield different location patterns under cost heterogeneity among firms.     

Japan's Fiscal Policies in the 1990s

This paper first summarises Japan's fiscal policies in the 1990s. Then, we investigate the macroeconomic impact of government debt and the sustainability problem. We find that the Keynesian fiscal policy in the 1990s was not effective and fiscal sustainability may therefore become a serious issue. We also estimate the optimal level of deficits and evaluate fiscal reconstruction movements. It is shown that the actual deficit exceeded the optimal level in the late 1990s. We then inspect fiscal reconstruction movements in the Hashimoto Administration in 1997 and find that the major factor of recession in 1997 was not fiscal consolidation. An important lesson from Japan's fiscal policies in the 1990s is that long‐run structural reform is more important than short‐run Keynesian policy.     

How have inflation-targeting central banks responded to supply shocks?

This paper examines how inflation-targeting central banks have responded to supply shocks, based on the sign-restriction VAR approach. It is found that inflation-targeting central banks have become accommodative to adverse supply shocks following the adoption of inflation targeting.     

Gains from equity carve-outs and subsequent events

This study examines why the stock price of a parent company reacts positively to the announcement of a carve-out. The study also focuses on the gains associated with the combinations of carve-outs and each of four subsequent events: M&A activity, secondary offerings, spin-offs, and reacquisitions. The study finds that these secondary events are useful in evaluating the potential market reactions to carve-out announcements. By analyzing 201 carve-outs conducted by nonfinancial firms in the U.S., this study finds that the stock market reacts favorably toward the stock of a parent company when the parent-subsidiary relationship is preserved after a carve-out. However, this reaction changes when secondary events occur. To be precise, the market does not have a significantly positive reaction to the parent company's stock when the announcement concerns only M&A. These results indicate that the stock market expects secondary events when companies announce carve-outs and that it evaluates the combination of events upon the announcement of the carve-outs. In addition, this study finds that the market expects M&A as a secondary event.     

Executive Compensation in Japan: Estimating Levels and Determinants from Tax Records

Most studies of executive compensation have data on pay but not total income. Because exchange‐listed Japanese firms (unlike exchange‐listed U.S. firms) need not disclose executive compensation figures in their securities filings, most studies on Japan lack even good data on pay. Through 2004, however, the Japanese tax office disclosed the tax liabilities of the 73,000 Japanese with the highest incomes. We obtained this data, and match the high‐tax list against the list of CEOs of the firms listed in Section 1 of the Tokyo Stock Exchange. We thus estimate salaries and risk exposure in a new way. We confirm survey and anecdotal evidence that Japanese executives earn less than American—about one‐fifth the pay, adjusting for firm size and outside income. Tobit regressions show that pay in Japan depends heavily on firm size (a .22 elasticity) and on accounting profitability, but not on stock returns. Additionally, family owned firms and those with large lead shareholders pay less to employee CEOs not in the family or with large shareholdings, as do firms whose directors have less tenure on the board.     

中国和日本的加工食品贸易格局和经济效率分析

本文运用贸易经济效率指数比较了两个典型的东亚国家中国和日本在加工食品方面的贸易表现.由于大国效应和数量庞大的中小贸易公司的恶性竞争,以及缺少有效的贸易管理措施,中国大部分加工食品出口和部分产品进口的经济效率恶化了.而日本仅在食品进口方面经济效率下降,可能原因是严格的技术壁垒导致进口来源集中于发达国家.本文建议中国通过整顿贸易秩序以及合理选择贸易时机来提高加工食品贸易的经济效率,日本的可行对策则是在保证产品质量的同时改变进口来源.     

Econometric analysis of expected price formation

The current report analyses the process of producers' expected price formation through the estimation of supply functions, using vegetables and green tea in Japan as an example. At first, theoretical analysis shows that the factors which transform the producers' expected price formation from the lagged expectation to the rational expectation are as follows: decrease in information price, increase in managerial ability and/or organizational innovation, rightward shift of supply curve, and increase in price elasticity in supply curve. Second, supply functions are estimated by using the price expectation formation which include the rational expectation and the lagged expectation as its extreme form. Consequently, producers' price expectations were found to approach the rational expectations in the case of Chinese cabbage, lettuce and green tea, whose supply curves show high price elasticities, and whose producers' organizations gather price information and monitor the production more than other crops taken in this paper.     

Deregulation in an energy market and its impact on R&D for low-carbon energy technology

This paper analyzes the impact of deregulation in an energy market on R&D activities for new energy technology when climate policy is implemented. A model of growth with vertical innovation is modified by including an oligopolistic energy supply sector for demonstrating to what extent deregulation in the energy supply sector will affect R&D activities for low-carbon energy technology, provided that carbon taxation is implemented. The analysis shows that, when the elasticity of substitution between input factors is less than unity, deregulation will drive energy R&D activities and reduce CO₂ accumulation if the energy market is highly concentrated in the beginning.     

Capital gains tax and individual trading: The case of Japan

Japan implemented a capital gains tax reform and reduced its flat rate in 2003. This study attempts to explain how this has contributed to the recent surge of individual trading, using three different methods of analysis. First, we perform a time-series analysis with the aggregate, market-level data. Second, we use firm-level, by-stock data to conduct a similar time-series analysis, as well as a panel data analysis. Third, we examine the price-change sensitivity of winners’ volume before and after the reform. The results clearly indicate that the tax cut has helped expand individual trading, as the average tax rate negatively correlates significantly with individual trading.     

Flight-to-quality in the stock–bond return relation: a regime-switching copula approach

Financial Markets and Portfolio Management - This paper examines the existence, intensity and international dependence of flight-to-quality from stocks to government bonds. To this end, we develop...