How much should we trust regression-kink-design estimates?

In a regression kink (RK) design with a finite sample, a confounding smooth nonlinear relationship between an assignment variable and an outcome variable around a threshold can be spuriously picked up as a kink and results in a biased estimate. In order to investigate how well RK designs handle such confounding nonlinearity, I firstly implement Monte Carlo (MC) simulations and then study the effect of fiscal equalization grants on local expenditure in Japan using an RK design. Results in both the MC simulations and the empirical application suggest that RK estimation without covariates can be easily biased, and this problem can be mitigated by adding observed covariates to the regressors. On the other hand, a smaller bandwidth or a higher-order polynomial, even a quadratic polynomial, tends to result in imprecise estimates although they may be able to reduce estimation bias. In sum, RK estimation with confounding nonlinearity often suffers from bias or imprecision, and estimates are credible only when relevant covariates are controlled for. I also examine how placebo RK estimation can effectively address these issues.     

An Emergency Evacuation Planning Model Using the Universally Quickest Flow

In recent years, catastrophic disasters by massive earthquakes have been increasing in the world, and disaster management is required more than ever. In the case of disasters such as tsunamis, a slight delay in evacuation may deprive evacuees of life. In this article, we formalize the emergency evacuation planning model for evacuation from tsunamis and other disasters based on the idea of the universally quickest flow. We show that there does not always exist a universally quickest flow when the capacity constraint of refuges is taken into account. Therefore, we propose an alternative criterion that approximates a universally quickest flow, and presents an algorithm for finding an optimal flow for this criterion. Numerical experiments are carried out for the evacuation of a local city in Japan where tsunami damages are assumed to occur when a large earthquake occurs in the ocean nearby.     

Dynamic Investment Strategy with Factor Models Under Regime Switches

A model for dynamic investment strategy is developed where assets’ returns are represented by multiple factors. In a mean–variance framework with factor models under regime switches, we derive a semi-analytic solution for the optimal portfolio with transaction costs. Due to the existence of transaction costs, the optimal portfolio is characterized as a linear combination of current and target portfolios, the latter of which maximizes the value function in the current regime. For some special cases of interest, we also derive simplified analytical solutions. To see the effect of regime switches, the proposed model is applied to US equity market in which small minus big and high minus low are employed as factors. Investment strategy based on our model demonstrates empirically that the regime switching models exhibit superior performance over the single regime model for such performance measures as realized utility and Sharpe ratio which are of particular interest in practice. Taking a close look at the time series of portfolio returns, the result shows the usefulness of the regime switching model as investors flexibly optimize asset allocations depending on the state of the market.     

Securing basic well-being for all

The purpose of this article is to examine the possibility of a social choice rule to implement a social policy for “securing basic well-being for all.” The article introduces a new scheme of social choice, called a social relation function (SRF), which associates a reflexive and transitive binary relation over a set of social policies to each profile of individual well-being appraisals and each profile of group evaluations. As part of the domains of SRFs, the available class of group evaluations is constrained by three conditions. Furthermore, the non-negative response (NR) and the weak Pareto condition (WP) are introduced. NR demands giving priority to group evaluation, while treating the groups as formally equal relative to each other. WP requires treating impartially the well-being appraisals of all individuals. In conclusion, this article shows that under some reasonable assumptions, there exists an SRF that satisfies NR and WP.     

An analysis of the formation and failure rates of minority-owned firms

This article primarily investigates the applicability of principles of industrial organization to an understanding of the formation and failure process of minority-owned firms. Among these principles are that formation will be high (and failure low) when a firm is located in a high growth industry, a high growth geographic locale, and an industry with low capital intensity and low concentration. The article also evaluates whether some of the hypotheses from the minority literature, such as the impact of SBA loans to minorities, also contribute to an explanation of the formation and failure process.     

MNC's competitive strategies,experiences, and staffing policies for foreign affiliates

This study investigates the relationship between the strategic role of a multinational corporation's (MNC) foreign affiliates and its international staffing policy. Specifically, this study examines how an MNC's decision on expatriation is affected by strategic roles assigned to foreign affiliates: global integration of activities versus local market seeking. An empirical study is conducted using a sample of 808 foreign affiliates of Japanese firms. The research findings suggest that strategic roles of foreign affiliates alone may not adequately explain the international staffing policies of Japanese MNCs. Rather, we found a significant moderating effect of international as well as host country experience on staffing practices for foreign affiliates. While the staffing policies of MNCs striving for improving global efficiency of their operation are moderated by both international and host country experience, those seeking a specific local market position are influenced only by host country experience.     

Extracting the commercialization gap between science and technology — Case study of a solar cell

In this paper, we compared structures of the citation network of scientific publications with those of patents, and discussed the differences between them. A case study was performed in a solar cell to develop a method of detecting gaps between science and technology. Scientific research has tended to be more basic, especially in terms of cell design, whereas patents have focused on more applied technology used in solar cell modules. Of the major citation clusters of scientific publications, only two, namely silicon and compound solar cells, corresponded semantically with patent clusters. Conversely, there were no patent clusters corresponding to the other two scientific research fronts, namely dye-sensitized and polymer solar cells. These research areas could be regarded as opportunities for industrial commercialization because scientific activities exist but not technological applications. Our results could offer an intellectual basis for discovering potential opportunities for industrial commercialization.     

RESOURCE ALLOCATION AND EFFICIENCY OF SHARECROPPING UNDER UNCERTAINTY*

The paper examines how efficiency of sharecropping under uncertainty can be tested empirically. It demonstrates even under uncertainty, equality of factor ratios between sharecropped land and owner-cultivated land supports the hypothesis that the terms of share contracts are effectively enforced by landlords, so as to achieve socially optimum resource allocation and risk sharing, unless the direct elasticities of substitution are identically equal to one. It also provides evidence, that the comparative yield tests conducted in different parts of South and Southeast Asia support the efficiency view of sharecropping.     

The Kigyo Keiretsu Organization and Opportunism in the Japanese Automobile Manufacturing Industry

This paper contends that the distinguishing feature of the subcontracting system for the manufacture and distribution of auto-parts in the Japanese automobile manufacturing industry can be explained by the opportunism hypothesis of transaction cost theory. Opportunism may arise when the parts-supplier uses its information advantage to obtain more favorable contract terms with the manufacturer. It is argued that in response to this kind of informational opportunism, the automobile manufacturer institutes a special form of vertical arrangement, called the kigyo keiretsu group. The kigyo keiretsu group consist of an association of vertically related parts-makers held together by a high degree of sales and technological interdependence, by partial stock ownership, by interlocking boards of directors and by long-term contract. This study raises the possibility of mitigating opportunism among the kigyo keiretsu group firms throughout the core automaker's shareholdings of its parts-supplier.     

Zombie firms and economic stagnation in Japan

It is often claimed that one contributing factor to Japan's weak economic performance over the past decade is that Japanese banks have continued to provide financial support for highly inefficient, debt-ridden companies, commonly referred to as ‘zombie’ firms. Such poor banking practices in turn prevent more productive companies from gaining market share, strangling a potentially important source of productivity gains for the overall economy. To explore further the zombie-firm hypothesis, we use industry- and firm-level Japanese data and find evidence that productivity growth is low in industries reputed to have heavy concentrations of zombie firms. We also find that the reallocation of market share is going in the wrong direction in these industries, adding to already weak productivity performance. In addition, we find evidence that financial support from Japanese banks may have played a role in sustaining this perverse reallocation of market share.