Northern policy and Japan: North Korea‐Japan normalization negotiations and Japanese policy towards North Korea

This paper seeks to examine the reality of the North Korea‐Japan negotiations, which have continued intermittently for more than 13 years since Kanemaru's visit to North Korea. It also analyzes Japanese foreign policy toward the North during the normalization negotiations at both international and domestic levels, and studies the effect that the normalization of relations of the two neighbor states will have on the Korean peninsula. To conclude, it argues that Japan's engagement policy would be expected to contribute to the stability and peace of the Korean peninsula and East Asia.     

A role model for China? Exchange rate flexibility and monetary policy in Japan

A substantial number of papers have proposed to allow for more exchange rate flexibility of the Chinese yuan. But few papers have tried to project how Chinese monetary policy will behave under flexible exchange rates. As Japan provides an important role model for China, this paper studies the role of the yen/dollar exchange rate for Japanese monetary policy after the shift of Japan from a fixed to a floating exchange rate regime. In contrast to prior studies, we allow for regime shifts in the impact of the exchange rate on monetary policy. The results show that the exchange rate had a substantial impact on Japanese monetary policy in periods of appreciation. This implies that repeated attempts to soften the appreciation pressure by interest rate cuts have led Japan into the liquidity trap. The economic policy conclusion for China is to keep the exchange rate pegged (to the dollar).     

Do house prices play a role in unconventional monetary policy transmission in Japan?

This study comprehensively analyzes the role of house prices in the transmission mechanism of unconventional monetary policy (UMP) in Japan using structural vector autoregression models. The empirical results show that house prices are significantly affected by UMP shocks, and fluctuations in house prices considerably affect macroeconomic variables. With a set of robustness checks and extensions, the findings indicate that house prices provide important channels for UMP transmission.     

Restrictive immigration policy in Germany: pains and gains foregone?

Many European countries restrict immigration from new EU member countries. The rationale is to avoid adverse wage and employment effects. We quantify these effects for Germany. Following Borjas (in Q J Econ CXVIII(4):1335–1374, 2003), we estimate a structural model of labor demand, based on elasticities of substitution between workers with different experience levels and education. We allow for unemployment which we model in a price-wage-setting framework. Simulating a counterfactual scenario without restrictions for migration from new EU members countries in Germany, we find moderate negative wage and employment effects for incumbent foreigners, but positive effects for natives. Our results indicate that for the native German population as a whole the immigration restrictions are not welfare enhancing.     

Unemployment information and wives’ labor supply responses to husbands’ job loss in Taiwan

Motivated by declining labor market opportunities in Taiwan, this study examines adjustments to wives' work patterns based on husbands' job loss for both unskilled and skilled labor families. Explicitly taking information acquired before job losses into account, married couples' dynamic labor supply equations are estimated by using a short pseudo-panel data set of Manpower Utilization Survey (MUS) in Taiwan during the period of 1993–2006. Our results indicate that the AWE in skilled families exhibits almost twice as big as those in unskilled families. When husbands' job loss is compounded with district- or industry-specific unemployment information, wives have slightly higher probabilities of labor force entry than those in the traditional model, and the probabilities increase with the length of observation. A comparison of the asymmetric response of the unskilled and the skilled wives suggests that facing husbands' job loss, unskilled wives respond to both economic downturns and upturns, but skilled wives only respond to economic downturns.     

Life-cycle search,match quality and Japan’s labor market

The Japanese labor market has been experiencing considerable transformations over the recent decades. We analyze the implications of some of these actual and potential transformations, whose impact may not be homogeneous across workers of different ages. We first develop a life-cycle search and matching model which incorporates random match quality as well as elements capturing important institutional features of the Japanese economy. Our model is consistent with the life-cycle properties of Japan’s labor market, namely that the job separation and unemployment rates are U-shaped, whereas the job finding rate declines with age. We then conduct three experiments that are relevant to Japan: a decline in productivity, a removal of the firing costs, and a decline in the population growth. In the first two experiments, we find substantial changes to these three rates, where young workers tend to be the most affected. We observe, however, a very small labor market impact in the third experiment.     

Trade policy and industrial policy in China: What motivates public authorities to apply restrictions on exports?

This paper investigates the motives behind China's fiscal policy targeting exports. It relies on detailed data at the product level over the period 2002–2012. We analyze two major export fiscal instruments: export tax and export VAT rebate. Our results suggest that while pursuing many objectives simultaneously, Chinese policy used the two instruments in a complementary way with the aim of achieving their industrial policy and strategic objectives. Some are officially stated objectives such as promoting technology or environmental protection, while others do not appear in official documents, such as subsidizing downstream sectors. We also observed that China managed these instruments dynamically to address temporary shocks, for example to temper rising food price or to support strategic sectors sensitive to price competitiveness in the middle of the financial crisis.     

What causes changes in the effects of fiscal policy? A case study of Japan

In the past two decades, the Japanese government has spent a considerable amount of money to counteract the severe recessions that have recurred since the early 1990s. Numerous studies have pointed out that the effects of these expenditures have diminished since around the 1990s. However, none of these studies has statistically explored the reasons for this diminution, which they implicitly or explicitly mention. The purpose of this study is to statistically investigate these reasons, using a threshold vector autoregression (VAR) in which the causes pointed out in the literature are adopted as the threshold. If the null hypothesis that the estimated parameters are equal under each regime is rejected, we can conclude that a given cause does affect the macroeconomic structure and, in turn, the fiscal policy effects. We then estimate the impulse response functions in both sample periods, as constructed on the basis of threshold estimates, and compare the effects of fiscal policy in each period.The following are the main results of the study. First, we found that the diffusion index of the attitudes of financial institutions toward lending and the yearly change in the annual average of the quarterly ratios of the structural primary budget balance to potential GDP significantly reject the null hypothesis; therefore, we concluded that these variables have a definite impact on fiscal expansion effects. Second, the resulting impulse response functions show that the effects are traditional, although there are some notable differences. In particular, when banks’ attitude toward lending is tight and the financial condition of the government is bad, the demand-enhancing effects of government expenditure should be considered weak. In this regard, the traditional accelerator effects of private investment, the existence of liquidity-constrained households, and non-Keynesian effects are key operative concepts.     

Does New Rural Pension Scheme decrease elderly labor supply? Evidence from CHARLS

This paper examines the effect of the New Rural Pension Scheme (NRPS) on the labor supply behavior of the elderly in rural China. Using pooled data from two waves of the China Health and Retirement Longitudinal Survey (CHARLS) and an analytical framework of combination of regression discontinuity design and difference in difference method (RD-DiD), we find no evidence that pension receipt from the NRPS program does significantly induce the elderly to withdraw from the labor market. The heterogeneous effects by health status indicate that pension recipient slightly decreases the probability of labor force participation for those individuals with chronic diseases; however, the effect is not statistically significant. The empirical findings suggest that the introduction of the NRPS program does not improve the welfare effect of the originally targeted elder individuals with illness.     

Fiscal policy in central and Eastern Europe: what happened in the run-up to EU accession?

This paper analyses the evolution of fiscal policy in central and eastern European countries during the EU accession process, testing for country and time specific effects. This is done by constructing Taylor-type policy rules and by calculating three measures of fiscal stance. A key finding is that the differences across countries are more significant than those across time. Baltic countries tended to have had tighter fiscal policy which responded to the output gap, larger central European countries had more lax (and increasingly lax) fiscal policies which were unresponsive to the output gap. These differences correlate closely with cross-country differences in exchange rate regimes and no link is found to either spending composition or political variables. Taken together the results suggest that the exchange rate regime is by far the most significant determinant of fiscal performance. These results suggest that the “soft power” of the prospect of EU entry did not act as a spur to greater fiscal discipline and that higher budget deficits in recent years cannot be blamed on costs of accession.

Birth order and intergenerational income mobility in Japan: Is the first-born child different?

This study examines how birth order affects intergenerational income mobility (IGM) in Japan, focusing on the difference in IGM between firstborn and later-born children. The elasticities of sons’ income with respect to fathers’ income are separately estimated for sons who are firstborn and sons who are later born by family size using a two-sample, two-stage least squares approach. For sons born in 1926–1981, this study finds that in families with four or more children, intergenerational income elasticity (IGE) for firstborn sons is substantially and significantly higher than that for later-born sons. However, no significant birth order effects are found in households with two or three children.     

Elderly long-term care policy and sandwich caregivers’ time allocation between child-rearing and market labor

Using an overlapping generations model, we present analyses of public long-term care provision effects on fertility and time allocation decisions of sandwich caregivers, those caring for young children and old parents simultaneously. If the public long-term care level runs short of the necessary level, then working children must compensate for the difference by spending their time. Reportedly, about a third of university students’ parents are sandwich caregivers in Japan, although Japan has a Long-Term Care Insurance system, which is a mandatory system with universal coverage. With a rapidly aging population, demand for long-term care is predicted to increase, thereby affecting family time allocation, e.g., fertility decisions, in Japan. Results show that if public long-term care production is costly relative to family care provision, then increases in public care provision lower the fertility rate. If labor productivity in the public long-term care sector improves, then it increases the fertility rate by freeing caregivers’ time from family care provision. It will also increase social welfare. The effects on labor employment in the goods production sector are generally ambiguous because the increased public care provision requires more labor.     

Current Account and Fiscal Policy in Japan: 1885–1991

This paper explores the empirical relationship between the current account balance and macroeconomic series for the Japanese economy over the years 1885–1991. The long-run equilibrium depends on which series (public debt or budget deficits) affects assets relative to a capital stock rate. Departing from the Ricardian Equivalence structure (no bequest motives), fiscal policy in Japan is shown to be more related to the current account when policy is introduced by shifts in tax revenues rather than by changes in national debt.     

Most-favoured-nation treaty in service of trade? Case: early trade policy relations between Finland and Japan and their impact on the sales networks of the Finnish forest industry

This article scrutinises the significance of the most-favoured-nation (MFN) treaty in promoting the development of commercial activity and its results in transnational trade. As cardinal agents of trade policy, governments act as ‘umpires’ in formulating and guarding the rules of international trade, while the ‘players’ are private corporations which conduct commercial operations in the playing field of international trade. Within the framework of Finno-Japanese trade relations, the players established and developed their trade networks (corporate interconnections) regardless of the umpires and their official rules, meaning the commercial treaties. Through a close examination of the early trade policy relations between Finland and Japan along with the formation and development of the Finnish forest industry’s sales networks into the Japanese market in the early twentieth century, this study demonstrates that there was no explicit causal connection between MFN treaties and the evolution of the Finnish forest industry’s export efforts – and their results.     

How is suicide different in Japan?

This study investigates suicide rates among OECD countries, with particular effort made to gain insight into how suicide in Japan is different from suicides in other OECD countries. Several findings emerged from fixed-effect panel regressions with country-specific time-trends. First, the impacts of socioeconomic variables vary across different gender–age groups. Second, in general, better economic conditions such as high levels of income and higher economic growth were found to reduce the suicide rate, while income inequality increases the suicide rate. Third, the suicide rate is more sensitive to economic factors captured by real GDP per capita, growth rate of real GDP per capita, and the Gini index than to social factors represented by divorce rate, birth rate, female labor force participation rate, and alcohol consumption. Fourth, female and elderly suicides are more difficult to be accounted for. Finally, in accordance with general beliefs, Japan's suicide problem is very different from those of other OECD countries. The impact of the socioeconomic variables on suicide is greater in Japan than in other OECD countries.     

The nexus of finance and GDP growth in Japan: Do real interest rates matter?

This study empirically investigates whether real interest rates are associated with a stronger or weaker finance–growth relationship in the Japanese economy, where the relationships between banks and firms are characterized by main bank relationships and keirestu as well as a government implemented low interest rate policies since the early 1990s. Several econometric models are used to obtain empirical robustness. This study confirms the substantial effects of real interest rates on finance–growth relationships in Japan. In the regime with higher (lower) real interest rates, the banking system has significantly positive (adverse) effects on output growth. Empirical evidence exists that a low interest rate policy is an important hindrance to the ability of the banking system to impact economic growth in Japan.     

Beauty premium in China's labor market: Is discrimination the main reason?

Based on data from the China Labor-force Dynamics Survey (CLDS), this paper analyzes the effects of the height as well as other appearance characteristics of workers on their wages. Regression results show that after controlling for social network, human capital, and other endowment characteristics, the effects of the appearance characteristics become smaller and statistically insignificant. The decomposition results of the wage-appearance differentials show that higher wages for good-looking workers are mainly attributable to differences in individual characteristics. Among them, the lower wages for shorter males and higher wages for thinner females are mainly attributable to the unexplained parts of discrimination. Males suffer more from “shortness penalty”, whereas females may earn from “pretty face”. Further results showed that height may influence blue-collar workers’ wages through the effect on physical strength. Empirical evidence also demonstrates that there are strong correlations between appearance and working ability (social network and human capital). Thus, our results confirmed the little beauty premium in the Chinese labor market and the relatively wages differentials are not mainly due to discrimination from consumers or employers, instead attributable mainly to differences of individual endowment characteristics.     

Japan’s quantitative monetary easing policy: Effect on the level and volatility of yield spreads

We examine the effects on the level and volatility of yield spreads of the Quantitative Monetary Easing Policy (QMEP) of the Bank of Japan (BoJ) implemented from March 19, 2001 to March 9, 2006. We adopt an Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) model to analyze daily data for the five year duration of QMEP. The purpose of QMEP was to reduce short-term interest rate expectations with the goal of bringing down long term interest rates to stimulate the economy. Under QMEP, the operational target of monetary policy was taken as the current account balances (CABs) of financial institutions held at the BoJ. In support of QMEP effectiveness, we find that the policy to raise CABs was indeed associated with a decrease in yield spreads across all maturities. At the same time, the policy may have increased the volatility of yield spreads at short and medium time horizons, perhaps due to unevern demand for government security issues that nevertheless left confidence in the future of low interest rates intact. Preserving liquidity at or above the CABs target range was found to decrease yield spreads.     

Does history repeat itself? Economic development and policy convergence in Vietnam and South Korea

With one of the world's fastest rates of economic growth since the 1990s, Vietnam could be seen as Asia's next tiger economy. This study examines whether there has been policy convergence between the older East Asian developmental state model of economic development and that adopted by Vietnam. The economic development trajectories of South Korea and Vietnam are compared to identify similarities and differences. It was found that while policy convergence is evident there is also some divergence between the two countries.