Why Are Concavity Conditions Not Satisfied in the Cost Function? The Case of Japanese Manufacturing Firms during the Bubble Period*

This paper examines empirically the reasons why Japanese manufacturing firms frequently fail to satisfy concavity of the cost function in input prices. We focus on the ‘bubble period’ in the 1980s when land was in great demand and land prices soared. By estimating the translog cost function with land as one of production inputs, we find that violation of concavity mainly resulted from weak bank–firm relationship and massive transactions of land. We also demonstrate that elasticities of substitution between land and other inputs are estimated quite differently if the firms violating concavity are not excluded from the analysis.     

The role of newly emergent wholesalers in the food and drink industry in Japan,c.1880 to 1940: Focusing on the case of Kokubu

Abstract

This article explores the historical development of Japanese wholesalers in the food and drink industry in modern Japan. Despite many criticisms of Japanese wholesalers as being “multi-layered,” “old-fashioned,” and “outmoded,” there were historical reasons for the existence of wholesalers. While the traditional wholesalers remained even after the Meiji Restoration, the new wholesalers emerged by dealing with new products that appeared for the first time in modern Japan. Utilizing the historical conditions of both producers and retailers, the newcomers such as Kokubu boosted their development by innovative activities and gradually superseded the traditional wholesale market, firmly establishing their position as general wholesalers before the Second World War.     

Competitive equilibrium cycles

Sufficient conditions on the structure of technology that give rise to robust periodic cycles in stocks, outputs, and relative prices in a stationary, fully competitive economy with an infinitely lived representative agent are given. The results are first derived in the context of a general intertemporal model of accumulation that has been used in the turnpike literature. These results are then applied to a two-sector neoclassical model of production, and sufficient conditions giving rise to robust periodic cycles are obtained in terms of relative capital intensities of the two sectors.     

Skill formation systems: A Thai-Japan comparison

This paper compares skill formation systems on the shop floor of the car battery manufacturing industry in Thailand and Japan through a series of intensive interviews with foremen in three firms: indigenous Thai, indigenous Japanese, and Thai-Japanese joint venture. This study finds similarities in the basic character of skill formation systems in the two countries, which have often been thought to be particular to Japan. Naturally, large differences are identified in the extent to which the systems are implemented. This implies general applicability of the Japanese skill formation systems, which are the core of Japanese management systems.     

A theory of heterogeneous city growth

We consider an economy with three cities producing different outputs. Two cities produce intermediate goods, a type 1 city producing an intermediate “agricultural” good with capital and labor only, and a type 2 city producing an intermediate “industrial” good with capital, labor, and human capital. A type 3 city produces the final good which is obtained from the two intermediate goods and labor. The asymmetric introduction of human capital allows us to prove that the three cities experience, at equilibrium, heterogeneous endogenous growth rates which are proportional to the growth rate of human capital. We show that the “industrial” type 2 city is characterized by the larger growth rate while the “agricultural” type 1 city experiences the lower growth rate, and thus the type 3 city is characterized by a growth rate which is a convex combination of the two former growth rates. This implies that the relative size in terms of output of the “agricultural” city decreases over time. This property allows us to recover the empirical fact that most non‐agricultural production occurs in growing metropolitan areas. But, simultaneously, as we prove that total labor employed in each city is proportional to the total population, the relative population size distribution of cities is constant over time, as shown in empirical studies.     

Market Valuation and the q Theory of Investment

This study re-evaluates the role of the stock market in Japanese corporate investment decisions based on time-series data. Employing the time-series technique, we examine why the performance of Tobin's average q -type investment function is poor. We construct a series of average q and another of marginal q (a more fundamental profitability measure of investment) and investigate the relationship between the two. A cointegrating relationship is not detected between the two measures, both of which have a unit root. The divergence of average q from marginal q is not narrowed even if the imperfect competition of the output market is taken into consideration. We also examine which q measure is more relevant to Japanese corporate investment decisions by estimating separately the investment function with two measures of q as an explanatory variable. The estimation results show that entrepreneurs place more emphasis on marginal q than on average q in investment decisions.
JEL Classification Number: E22.