Why principals tolerate biases of inaccurate agents

Some agents are more accurate than others in estimating the best policy. The more accurately an agent estimates a policy's effects, the more he will resist biases, such as bribes from a special interest. Thus, a special interest needs to pay a larger bribe to an accurate agent than to an inaccurate agent. The accurate agent who is biased will then more likely cause harm than does an inaccurate agent who favors the special interest. Therefore, the principal may gain more from controlling biases of an accurate agent than of an inaccurate one. Thus, high ability of public officials may be associated with little corruption.     

Resistance to Trade Liberalization in Unionized Sector

This paper studies the lobbying against trade liberalization by both a firm and a union in the same industry. We find that the relationship between their political activities depends on the effect of political activity by one on the marginal effectiveness of political activity by the other. We also show that, when they are strongly risk-averse and their political activities are strategic complements, trade liberalization is likely to be successful if business is brisk, the foreign firm's production cost is high or the number of union members is small. However, when they are not strongly risk-averse, these results hold reversely.     

Mixed duopoly: Differential game approach

This study formulates a dynamic mixed oligopoly model, in which a state‐owned public firm competes against a private firm over multiple periods. We adopt a differential game formulated by Fershtman and Kamien [Econometrica 55 (1987), pp. 1151–1164] and investigate how the dynamic competition affects the optimal privatization policy. We characterize the open‐loop Nash equilibrium (OLNE) and Markov‐perfect Nash equilibrium (MPNE). We show that in the MPNE, an increase in the degree of privatization has a nonmonotonic effect on the price, increasing it in a wide range of parameter spaces, which is in sharp contrast to the result in the OLNE or static analyses. We also find that the optimal degree of privatization is higher in the MPNE than that in the OLNE and static equilibrium. These results suggest that intertemporal strategic behavior changes the optimal privatization policy.     

The effects of the raising-the-official-pension-age policy in an overlapping generations economy

This paper studies how economic variables are affected by raising the official pension age. Although it is said that such a policy increases output, this paper shows that such a statement is not necessarily true. Moreover, the paper finds that the social security benefit can decrease, which implies that it might be impossible to sustain the same level of benefit only by such a policy.     

Competition for private capital and central grants: the case of Japanese industrial parks

Local governments invest in public infrastructure to develop their regions. When they depend on intergovernmental grants for local development and have opportunities to lobby upper-level governments for such grants, horizontal intergovernmental competition in lobbying activity may emerge in addition to competition over public infrastructure. This paper empirically examines the existence of these interactions between Japanese localities, by using data on the value of industrial parks as infrastructure provisions and on personnel interchanges between the central and local governments as a measure of lobbying activity. Our results suggest that a Japanese local government’s choice of the size of industrial parks and its invitation to central officers to act as a director on loan are positive responses to the neighboring local government’s policy choices. As the value of the industrial parks in a district is affected by the neighboring districts’ lobby activities and their industrial park values, we can interpret these results as evidence of inter-regional competition in these two dimensions, rather than control by the central government in this unitary state.     

Role of linking mechanisms in multitask agency with hidden information

We investigate the adverse selection problem where a principal delegates multiple tasks to an agent. We characterize the virtually implementable social choice functions by using the linking mechanism proposed by Jackson and Sonnenschein (2007) [20] that restricts the message spaces. The principal does not require any incentive wage schemes and can therefore avoid any information rent and welfare loss. We show the resemblance between the functioning of this message space restriction and that of incentive wage schemes. We also extend the results of the single-agent model to the multi-agent model.     

An Hedonic Analysis of the Rental Office Market in the Tokyo Central Business District: 1985–1994 Fiscal Years

We study the rental office market in the Tokyo central business district by estimating hedonic equations for the office rent for 1985–94 fiscal years. This period includes the "Bubble" of asset prices, followed by its deflation. We find that the characteristics related to transportational conveniences are less effective in explaining office rents than the characteristics related to the agglomeration of offices and the amenity characteristics of the office buildings themselves. Using a skewed error-term specification, we show that the discount in rental transactions is not irrelevant. The hedonic office rent indices and possible policy implications are also presented.
JEL Classification Numbers: L85, R32.     

Welfare effects of bubbles in an endogenous growth model

This paper examines welfare effects of asset bubbles in an endogenous growth model with overlapping generations. In our model, a steady-state equilibrium with bubbles exists only if the presence of bubbles raises the welfare level of the initial generation. Bubbles can be beneficial to generations born at relatively early dates, whereas they reduce the welfare level of sufficiently distant future generations. Increasing the rate of supply of the useless asset improves the lifetime utilities of future generations.     

Preferences for Educational Status,Human Capital Accumulation,and Growth

Using an overlapping generations model in which human capital accumulation has positive external effects on the production of the human capital of future generations, this paper analyzes implications of agents’ having preferences for educational status, represented by human capital holdings relative to the social average. Examining the value and sign of the optimal distortionary tax in the optimal taxation scheme, we analyze the efficiency of the level of human capital accumulation in a decentralized economy. The desire for educational status can compensate for insufficient accumulation of human capital stemming from human capital externalities directed toward future generations.