Macro Determinants of FDI Inflows to Japan: An Analysis of Source Country Characteristics

This paper examines the source country determinants of FDI into Japan. The paper highlights certain methodological and theoretical weaknesses in the previous literature and offers some explanations for hitherto ambiguous results. Specifically, the paper highlights the importance of panel data analysis, and the identification of fixed effects in the analysis rather than simply pooling the data. Indeed, we argue that many of the results reported elsewhere are a feature of this mis‐specification. To this end, pooled, fixed effects and random effects estimates are compared. The results suggest that FDI into Japan is inversely related to trade flows, such that trade and FDI are substitutes. Moreover, the results also suggest that FDI increases with home country political and economic stability. The paper also shows that previously reported results, regarding the importance of exchange rates, relative borrowing costs and labour costs in explaining FDI flows, are sensitive to the econometric specification and estimation approach. The paper also discusses the importance of these results within a policy context. In recent years Japan has sought to attract FDI, though many firms still complain of barriers to inward investment penetration in Japan. The results show that cultural and geographic distance are only of marginal importance in explaining FDI, and that the results are consistent with the market‐seeking explanation of FDI. As such, the attitude to risk in the source country is strongly related to the size of FDI flows to Japan.     

Multiplant MRP

Many manufacturing firms have multiple manufacturing plants, located in geographically diverse parts of the world. This situation is becoming more common, as firms establish new plants in foreign countries to take advantage of low labor cost. In such cases, it is not unusual for the firm to retain production capability of certain key parts in a backup plant, with the necessary equipment and trained workforce in place. High volume production could be obtained relatively quickly from the backup plant in case of an emergency at the main supplying plant. In such multiplant settings, the transportation costs are significant. Throughout this paper, we use the term “multisourced parts” to describe parts produced in more than one location.Material Requirements Planning (MRP) is the component of a total manufacturing control system that is designed to manage inventory and plan orders for parts and material with dependent demand (demand derived from the demand of other items). Most of the literature on MRP systems discusses MRP methodology in a single-plant environment. Most MRP software systems in use today are single-plant systems.Currently, it is common for firms with multiple plants treated as cost centers to use an independent single-plant MRP system for each and handle the transshipment problems manually. Because of lack of coordination of production schedules between supplying and demanding plants, those firms hold more inventory and experience longer lead times than necessary to compensate for uncertainties in schedules and supply policies.The purpose of this article is to enhance single-plant MRP systems for coping with multiplant situations in which: the plants are regarded as cost centers, there exist multisourced parts, and the transportation costs are significant. The multiplant MRP system should recognize that parts are produced in different plants, make offset calculations for in-transit lead times, and consider transportation costs when establishing production requirements and shipping routes for multisourced parts. The objective is, beginning with the corporate-determined master schedule for finished products, to communicate in one planning cycle time-phased planned order release schedules and shipping/delivery schedules to each manufacturing plant producing components for the finished products.We first present a simplified framework for the multiplant MRP system, where a transportation algorithm is incorporated into the MRP logic. Then we refine this simplified framework to handle more complex aspects of a multiplant network. These complexities include the treatment of requirements that are not shipped on time and the regeneration of new MRP schedules. We also observe that the solution to the transportation problem described above is affected by the lot-sizing rules employed. In addition, we discuss several important issues and decisions that confront a firm when implementing a multiplant MRP system.     

AN ECONOMIC RESPONSE MODEL OF HERBICIDE APPLICATION FOR WEED CONTROL

A biologically realistic model of crop yield response to herbicide application is presented. It includes functions for weed mortality from herbicide application and yield loss due to surviving weeds. The optimal herbicide rate and two types of decision thresholds are derived theoretically and illustrated with empirical examples. Responses of the various decision criteria to changes in parameters are also examined theoretically and empirically. A multidimensional threshold for weeds based on weed density and weed-free yield is presented. The issue of farmers using other than officially recommended herbicide rates is discussed.     

Adjusting for the intervalling effect bias in beta: A Test using Paris Bourse Data

This paper uses a sample of daily returns data from the Paris Bourse to test the predictions of and adjustment procedures implied by the Cohen-Hawawini-Maier-Schwartz-Whitcomb (1983a,b) model of the intervalling effect bias in OLS beta estimates. CHMSW show that the bias diminishes asymptotically to zero as the differencing interval increases and that the sign of the bias depends on a stock's relative value of shares outstanding. We employ the three-pass regression procedure of CHMSW (1983b), but we test a broader set of second pass functional forms and use the Box-Cox (1964) transformation model to verify our chosen form. The CHMSW adjustment procedures are compared with that of Scholes-Williams (1977), and the latter is shown to contain a significant intervalling effect bias.     

Reviews

RESTRUCTURING THE STEEL INDUSTRY.

Ray Hudson and David Sadler, 1989: The International Steel Industry: Restructuring, State Policies and Localities. London: Routledge, £30.00 cloth.

BEYOND THE INNER CITY.

Byrne, D. 1989: Beyond the Inner City. Open University Press, £9.95 paper, £27.50 cloth.

REGIONAL DEVELOPMENT.

Harris, R. I. D. 1989: The Growth and Structure of the UK Regional Economy 1963-85. Aldershot: Avebury, £35.00 cloth.     

A COMPARATIVE ANALYSIS OF AGRICULTURAL TRACTOR INVESTMENT MODELS

An implicit rental price approach is used to analyse the determinants of farm tractor investment at the aggregate level. Three models, based on different assumed factor substitutabilities, are compared. Variations in the rental price of tractors appear to have less effect on demand than variations in factors affecting the profitability of the cropping enterprise as a whole. The implications for forecasting and for policy instruments, such as the investment allowance, are discussed.     

Anti-Public Broadcasting

The BBC has constantly sought to justify its state support by claiming that it must offer 'public-service' broadcasting. David Graham (right), of Channel 4's Diverse Reports, argues that the BBC's position is both a misunderstanding of economic reality and a brake upon the development of consumer choice and diversity in the market. The Government's 'protection of the well-heeled' imposes 'middle-class tastes on ordinary men and women'.