Entrepreneurship and business culture in Japan and the U.S.

It seems to me likely that entrepreneurship will take a different path in Japan than it has in the U.S. Given the prominence of large organizations in key areas of Japan's economy and the emphasis its society places on lifetime employment relationships, many of the “startups” of the sort that transformed the American business are more likely to happen within existing firms rather than as new enterprises. Such development, called “intrapreneurship” in the U.S. requires new institutional structures and rewards. Such changes will not come easily, because they run against the grain of Japanese society and business culture, yet I believe that success will come to those who can execute such strategies.     

“Keep silent and make money”: Institutional patterns of earnings management in China

Assessing the overall quality of Chinese financial data is important to both academic researchers and regulators. Using data from the industrial census of China, we examine the institutional pattern of the manipulation of reported profit statistics by manufacturing firms. This manipulation of profits is called “earnings management.” We find that earnings management is more pervasive in China than in mature market economies such as the U.S., and that Chinese firms appear to follow a “keep silent, make money” strategy by managing their reported earnings to zero. Specifically, we find that increased earnings management is associated with state-owned firms, firms reporting to higher levels of government, and firms in more marketized regions.     

Japanese government debt and sustainability of fiscal policy

We construct quarterly series of the revenues, expenditures, and debt outstanding for Japan from 1980 to 2010, and analyze the sustainability of the fiscal policy. We pursue three approaches to examine the sustainability. First, we calculate the minimum tax rate that stabilizes the debt to GDP ratio given the future government expenditures. Using 2010 as the base year, we find that the government revenue to GDP ratio must rise permanently to 40–47% (from the current 33%) to stabilize the debt to GDP ratio. Second, we estimate the response of the primary surplus when the debt to GDP ratio increases. We allow the relationship to fluctuate between two “regimes” using a Markov switching model. In both regimes, the primary surplus to GDP ratio fails to respond positively to debt, which suggests the process is explosive. Finally, we estimate a fiscal policy function and a monetary policy function with Markov switching. We find that the fiscal policy is “active” (the tax revenues do not rise when the debt increases) and the monetary policy is “passive” (the interest rate does not react to the inflation rate sufficiently) in both regimes. These results suggest that the current fiscal situation for the Japanese government is not sustainable.     

Land use change and environmental stress of wheat, rice and corn production in China

Grain self-sufficiency is one of the most important agricultural policy goals in China. With only modest imports, China has succeeded in feeding 22% of the world's population on only 7% of its land. However, a high price has been paid for this enormous achievement. Increase in grain yields, in particular in rice, as the main source of production growth, relied heavily on intensive use of physical inputs and increasing intensity of farming systems. Soil degradation, water scarcity, and severe pollution were among the consequences as well as declining efficiency of fertilizer application. Using county-level panel data from 1980 to 2003 and graphical (GIS-based) analysis, this paper first looks at the spatial change of the major grain production across regions over the past two decades, towards the northern and northeastern provinces. The analysis is complemented by using a random panel data model, which underscores the significant influence of land availability, degree of urbanization, and government policy on grain production. Finally, this analysis addresses environmental stress which includes both soil degradation and water shortage. The latter is already severe in many of the traditional grain producing areas, but will now become a bigger problem in the “new” grain producing areas, as these have traditionally much less water resources. Hence, while the economic rational of the “grain shift” towards the northern and northeastern regions is understandable, its sustainability is not guaranteed.     

Was Malthus right? The relationship between population and real wages in Italian history, 1320 to 1870

In this article we investigate the relation between population and real wages in the Italian economy during the period 1320–1870. The main result is that the positive check is strong and statistically significant but the other equilibrating mechanism in the Malthusian model – the preventive check – based on the positive relationship between fertility and real wages does not operate in pre-industrial Italy. In contrast to the Malthusian hypothesis, we find a negative feedback from wage to population. The empirical result is clearly consistent with the theoretical framework of the “old age security motive”. We show, with a simple overlapping-generation model, that by allowing for substitution in a pre-industrial economy between child quantity and other assets (such as new seeds, better soybean quality, and new cultivation and irrigation methods) fertility may be negatively affected whenever income rises.     

Transactional activities and total factor productivity growth in Taiwan

Total factor productivity (TFP) growth shows how rapidly an economy is enhancing technology and the efficiency with which it allocates resources. It has been argued that “miraculous” growth in East Asian economies may not be sustainable, due to relatively low rates of TFP growth. Among these economies, it appears that Taiwan has indeed exhibited substantial technological progress. Failure to control for transactional activities, however, can distort the impression of TFP growth. This study recalculates Taiwan's TFP growth for the 1957–1993 sample period, adjusting for transaction costs in the government and private sectors. For the early years of the sample, 1957–1973, the economy's technological progress is better than GDP-based calculations suggest. In recent years, 1983–1993, productivity improvement has been overstated, but the economy has still exhibited relatively fast TFP growth.     

Herding behaviour in the Chinese and Indian stock markets

The existence of herding behaviour challenges the validity of the “efficient market hypothesis”. This study examines herding behaviour in the Chinese and Indian stock markets; our findings suggest that herding behaviour exists in both. The level of herding depends on market conditions. In the Chinese market, herding behaviour is greater when the market is falling and the trading volume is high. On the other hand, in India the study finds that it occurs during up-swings in market conditions. Herding behaviour is more prevalent during large market movements in both markets. In relative terms, a lower prevalence of herding behaviour was detected in the Indian stock market.     

China's grain marketing system reform in 1993–1994: empirical evidence from a rural household survey

By utilizing a rural household survey, this paper domonstrates the progress in China's grain marketing reform in 1993 and evaluates to what extent the reform was reversed in 1994. Specifically, we investigate the degree of commercialization, changes in state's contract procurement quota and changes in the marketing channels. Overall, the grain market has been liberalized to a very large extent. Participation of the private traders have already grown to a significant level, occupying more than one-third of the market share for wheat and rice and more than half for maize. For minor crops, the share of private traders were even bigger. Despite the reversal in 1994, the grain market was still very “open.” Counting all grain types, the state was controlling only about one-third of the marketed surplus. However, if the central leadership perceived any serious instability in the market for a certain grain, examples provided illustrate how the state's control could certainly be strengthened significantly.     

Commercialization as exogenous shocks: The effect of the soybean trade and migration in Manchurian villages, 1895–1934

The effects of commercialization and migration in traditional agrarian economies such as China's during the nineteenth and twentieth centuries have been a subject of ferocious debate. Using data from Manchuria on soybean cultivation and exports, we employ difference-in-differences and instrumental variable approaches to demonstrate a significantly positive relationship between growing soybeans for export and the returns to migration. Those who migrated to Manchuria in response to high market prices, and to villages more suitable for cultivating soy prospered most; they owned approximately two-thirds more of the arable land and one-third more of houses than those who failed to do so. Evidence suggests that the positive welfare effect of commercialization-cum-migration was confined not only to the rich, who seek to relieve the “land constraint” at home, but possibly also to the poor.     

Migration constraints and development: Hukou and capital accumulation in China

Rural–urban migration flows are a crucial corollary of economic development. The adverse or beneficial effects of internal migration, for sending as well as receiving areas, and the definition of optimal migration policies, have remained much discussed issues since the seminal works of Harris and Todaro (1970). This debate is especially acute in China where the “household registration system” (hukou) acts as a strong constraint on individual migration. This paper aims to assess the consequences of hukou through a simple model of a developing dual economy with overlapping generations. Contrary to existing studies focused on the contemporaneous allocation of economic resources, it deals with the dynamic consequences of migration flows and migration policies. It shows that, in fairly general circumstances, hukou-related migration constraints can actually hasten development, understood as the transfer of the labor force to the modern sector, driven by capital accumulation. The hukou system could thus be one of the causes of the extremely high Chinese saving rate and of the high pace of Chinese development. Insights from the model are confronted with stylized facts from the Chinese development, and theoretical results are especially consistent with the effects of the 2001 “towns and small cities” reform.     

The rise and fall of spatial inequalities in France: A long-run perspective

This paper studies the evolution and determinants of spatial inequalities in France. To this end, we use a unique database providing data on value-added, employment, and population over the entire set of French “Départements” in 1860, 1896, 1930, 1982, and 2000. These data cover three sectors: Agriculture, Manufacturing, and Services. Firstly, we confirm the existence of a bell-shaped process of spatial concentration in Manufacturing and Services over time. In contrast, labor productivity has been converging across departments. Secondly, we find considerable agglomeration economies over the whole period. The spatial distribution of these gains is determined mainly by market potential in the first sub-period, 1860–1930, and higher education in the second, 1930–2000.     

Stock price targeting and fiscal deficit in Japan: Why did the fiscal deficit increase during Japan’s lost decades?

The purpose of this paper is to explain why Japan’s fiscal deficit increased so dramatically in the 1990s and the 2000s. We focus on the role of “stock price targeting” to explain why the fiscal expenditure increased so much. After presenting a simple model to describe government behavior with an optimistic view about stock price and output growth, the paper tests whether the model can explain Japan’s fiscal expenditure. The empirical results, using biannual and high-frequency data of the 1990s and the 2000s, show that the stock price targeting can track Japan’s fiscal expenditure reasonably well, especially in the 1990s. They imply that without the stock price targeting, the total amount of biannual fiscal stimulus from 1992 to 2000 would have been lower by 2.5 trillion yen on average.     

The Currency Denomination of World Trade after European Monetary Union

This paper addresses the question of which role the currencies of the three major economies in the world might play in global trade after European economic and monetary union. Based on historical data about trade flows and invoicing practices as well as “G-3” economies' inflation records, it is argued that, most likely, the U.S. dollar will maintain its dominant role in trade denomination for quite an extended period of time after the European changeover. From the data discussed, the euro will immediately take on the role of the second most important trade vehicle currency, well in advance of the Japanese yen. Due to network effects, the euro is likely to gradually expand its share in global trade invoicing thereafter, primarily at the expense of the dollar in Central and Eastern Europe, the Mediterranean, and, perhaps, also in Asia.J. Japan Int. Econ., Dec. 1998,12(4), pp. 424–454. London School of Economics, Financial Markets Group and CEPR, European Central Bank, DG Research, Kaiserstrasse 29, 60311 Frankfurt, Germany.Copyright 1998 Academic Press.Journal of Economic LiteratureClassification Numbers F19, F14, F33, F49, E41.     

Forecasting U.S. car sales and car registrations in Japan: Rationality, accuracy and herding

We analyze forecasts of car sales in the U.S. and forecasts of car registrations in Japan. We document a substantial heterogeneity of forecasts, and we show that, based on traditional criteria, forecasts are neither rational nor unbiased. We also report that forecasters anti-herd, that is, forecasters seem to intentionally scatter their forecasts around a consensus forecast. We further show that cross-sectional heterogeneity of forecasts with regard to anti-herding transmits onto cross-sectional heterogeneity of forecast accuracy. Specifically, we document that forecasters who herd provide more accurate forecasts than their colleagues who anti-herd.     

To Spend the U.S. Government Surplus or to Increase the Deficit? A Numerical Analysis of the Policy Options

This paper provides a numerical analysis of the likely benefits from adopting alternative ways of reducing the projected fiscal surplus (as of the summer 2001) in the United States economy. Calibrating a small growth model, our results suggest that investing the surplus in public capital is likely to yield the greatest long-run welfare gains, although decreasing the capital income tax is only marginally inferior. Both these options dominate increasing government consumption expenditure or decreasing the tax on labor income. By shifting resources from consumption toward capital the two superior policies involve sharp intertemporal tradeoffs in welfare; significant short-run welfare losses are more than compensated by large long-run welfare gains. By contrast, the two inferior options are gradually welfare-improving through time. A crucial factor in determining the benefits of reducing the government surplus through spending is the size of the government sector relative to the social optimum. We find that the second-best optimum is to increase both forms of government expenditure to their respective social optima, while at the same time restructuring taxes by reducing the tax on capital and raising the tax on wage income to achieve the targeted reduction in the surplus. J. Japan. Int. Econ., December 2002, 16(4), pp. 405–435. Department of Economics, University of Washington, Seattle, Washington; and Department of Economics, Terry College of Business, University of Georgia, Atlanta, Georgia. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: E62, O41.     

Emerging financial markets and early US growth

Studies of early US growth traditionally emphasize real-sector explanations for an acceleration that is evident by the period 1815-1840. Interestingly, establishment of the nation's modern financial structure predated by three decades the transportation improvements and widespread use of water- and steam-powered machinery that are thought to have triggered modernization. We argue that an innovative and expanding financial system, by providing debt and equity financing to businesses and governments as new technologies emerged, was central to early growth and modernization. To test the hypothesis, we employ a set of multivariate time series models that relate measures of banking and equity market activity to investment and business incorporations from 1790 to 1850. The results support the hypothesis of “finance-led” growth. Our new view is at odds with earlier views that emphasize the deficiencies rather than the advantages of the early US financial system.     

Taking technology to task: The skill content of technological change in early twentieth century United States

This paper uses new data on the task content of occupations to present a new picture of the labor market effects of technological change in pre-WWII United States. I show that, similar to the recent computerization episode, the electrification of the manufacturing sector led to a “hollowing out” of the skill distribution whereby workers in the middle of the distribution lost out to those at the extremes. OLS estimates show that electrification increased the demand for clerical, numerical, planning and people skills relative to manual skills while simultaneously reducing relative demand for the dexterity-intensive jobs which comprised the middle of the skill distribution. Thus, early twentieth century technological change was unskill-biased for blue collar tasks but skill-biased on aggregate. These results are in line with the downward trend in wage differentials within U.S. manufacturing up to 1950.     

到“体制内”去的隐忧与省思

近些年来年轻人到"体制内"去已渐成潮流,但其中的诸多隐忧当引起我们高度关注并深刻省思:一是我们当年改革中敢闯敢试的勇气正在衰减;二是我们的经济社会改革还远未"到位";三是资源集中和依附于权力的现象依旧突出。当前必须以更大的勇气和智慧继续深化改革,才能迎来中国经济社会发展新的春天。     

The effects of unemployment and inflation on the income distribution: A regional view

VI. Summary and Conclusions The behavior of the U.S. income distribution over the business cycle has been the subject of several previous studies. However, a facet of these inquiries which has not been viewed is the geographical effects within the U.S. The diverse economic characteristics of the country have contributed to uneven inflationary and unemployment experiences among the respective regions during the national business cycles. The purpose of this study has been to model the regional income inequality responses to the distinct macroeconomic records for the years 1968–1976. One general consequence of this study is the conformation of earlier work suggesting that in some settings increases in the unemployment rate tend to increase the extent of income inequality and that inflation tends to reduce the extent of such inequality. Another result, however, has not been anticipated: namely, that regional inflation and unemployment had a waker impact on the income distribution the more unequal the distribution. For example, the weakest effects of the business cycle were observed for the South, and it was the Southern region which had the greatest income inequality. The North Central region, on the other hand, showed the greatest sensitivity to the business cycle, and it has the most equal income distribution.¹² Such geographical disaggregation seems important in understanding the varied implicit distributional effects within the U.S. when macroeconomic policy is aimed at reducing unemployment and inflation.     

文化距离和国际直接投资流向：S型曲线假说

文化距离和国际直接投资流向的关系一直是学术界研究的热点问题,并且存在着“文化距离悖论”。本文在文化距离所产生的“外来者劣势”和“外来者收益”的基础上建立了新的理论框架,以此来分析文化距离和国际直接投资流向之间的复杂非线性关系。1993-2006年49个世界重要经济体在29个OECD成员国的国际直接投资数据表明,文化距离和国际直接投资流向之间存在着水平S型曲线关系。这一研究结果能够较好地解释文化距离和国际直接投资流向之间的“文化距离悖论”。