Published papers

Global trade suffered a significant contraction in 2020 as a result of the COVID-19 pandemic, and its growth is expected to remain below the pre-pandemic trend. Did the relative importance of countries in the world trade network change as a result of the pandemic? The answer to this question is particularly important for the Association of Southeast Asian Nations (ASEAN) countries because of their relative importance in world trade as well as their strong trade linkages with China, where the COVID-19 virus originated. This paper examines how the world trade network has changed since the COVID-19 pandemic, with a particular focus on ASEAN countries. Tracking the changes in centrality from January 2000 to March 2021, we find no evidence for most ASEAN and major trading countries that centrality changed significantly after the pandemic began. Our results suggest the resilience of the trade pattern for these countries.

The declining share of manufacturing value-added, often referred to as ‘deindustrialisation’, is fast becoming a major concern for policymakers and academic researchers, especially in high-income countries. When compared with country-level analysis, however, regional-level analyses of deindustrialisation within a country are limited. This paper empirically examines how and why the patterns of deindustrialisation are uneven across regions within a country. The analysis builds upon the neoclassical trade model and uses regional-level data in Japan where both detailed output and input data are available at the regional and industry levels for both manufacturing and non-manufacturing industries over the last four decades. One of the major findings is that the large variation in deindustrialisation within a country is attributable to differences in productivity and price changes across regions. In contrast, the effect of the slowdown in capital accumulation, partly from the expansion of foreign direct investment or offshoring, commonly appears not in specific regions but across regions. The effect of spatial interdependence is also not only statistically significant but also nonnegligible in terms of its magnitude.

While in many advanced countries the increasing import competition from China on employment is a major concern for policymakers and the general public, its impact of Chinese import competition could be different across countries, depending upon the volume and the composition of the products. This paper examines the impact of the China shock on employment in six advanced countries. We find that the import penetration of final goods from China has negative effects on manufacturing employment in these countries, whereas the import penetration of intermediate inputs from and the exports to China could have positive effects. Moreover, such positive effects could offset or even outweigh the negative effects in some countries. These results together suggest that a careful interpretation is needed when evaluating the external validity of the China shock that is obtained in one country.

Shortly after Edward E. Leamer found that the Leontief Paradox was based on a simple conceptual misunderstanding in 1980, Richard A. Brecher and Ehsan U. Choudhri in their 1982 article argued that the fact that the United States exported labor services was, in itself, paradoxical because it is true if and only if its per capita consumption is less than the world average. Surprisingly, however, no formal answer to this paradox has been provided for nearly four decades. This paper revisits this paradox and formally shows that the paradox can be resolved if the Heckscher–Ohlin–Vanek model takes into account technology differences across countries and trade imbalance. In contrast, the paradox cannot be resolved even if the analysis takes into account quasi‐homothetic preferences, the Armington home bias, or offshoring.

Political conflict between nations sometimes leads to consumer boycotts. We examine the regional impacts of bilateral boycott activity by investigating the 2019 Korean consumer boycott of travel to Japan. Employing triple- and double-differences designs, we find that the impact of the boycott is large and regionally heterogeneous. Japanese prefectures with high (i.e., 75th percentile) pre-boycott dependency on visitors from Korea suffer bilateral export losses of 56.9 to 60.9 percent and aggregate export losses of 10.5 to 13.3 percent. Prefectures with low (i.e., 25th percentile) Korea dependency experience bilateral losses of 47.8 to 49.7 percent and aggregate losses of 3.3 to 4.2 percent.

We examine the regional impacts of the Sino–Japan dispute over the Diaoyu/Senkaku Islands that sparked a Chinese consumer boycott of travel to Japan from August 2012. This boycott caused significant and varied regional impacts across Japan. Prefectures that had higher pre-boycott dependency on Chinese visitors, particularly tourists, experienced the largest negative effects. While the boycott's intensity was strongest in the first 6 months, substantial negative impacts were still observable when averaging across 24 months post-boycott. Our results demonstrate the importance of diversification across traveler types and countries of origin in providing travel services to mitigate risks from political conflicts.

Two‐ or more‐factor general equilibrium models commonly assume no factor intensity reversals (FIRs): a good that is relatively capital intensive compared with other goods within a country/region is also relatively capital intensive within another country/region. This assumption is so important that its breakdown results in the collapse of several well‐known theorems, such as the Heckscher–Ohlin theorem and the Stolper–Samuelson theorem. Seeing a recent observation, however, Feenstra (2015, Advanced international trade: Theory and evidence (2nd ed.), Princeton University Press) argues that FIRs are quite realistic. Our nonparametric test finds that recent regional‐level data support his view. At the two‐digit industry level, the degree of FIRs among regions is higher than those found in previous studies, which is accompanied by wide differences in relative factor prices among regions. The degree has also increased over the last two decades. FIRs are even stronger at the disaggregated four‐digit industry level and, though not many, exist at the two‐aggregated‐industry level as well. At all the three levels, FIRs do not disappear even when we take into account other factors such as human capital and land. Thus, considering a model without restrictions on FIRs might be a possible direction of research.

With the growing concerns about increasing protectionism, several empirical studies have investigated the effects of protection. While these studies presented interesting and important findings, few of them have discussed their frameworks and results in a comprehensive manner. This paper reviews these recent studies. We first show that they mainly employ either quantitative trade models or difference-in-differences design to investigate protectionism. We then discuss the strengths and limitations of these approaches. Finally, we consider possible directions for future research.

Recent research has begun to imply intermediate goods-skill complementarity; however, this possible complementarity has been hypothesized but not statistically tested, despite the increasing importance of intermediate goods in production. This study provides statistical evidence regarding whether intermediate goods are more complementary with skilled labor than with unskilled labor. Using panel data from 40 countries over the period 1995-2009, we estimate a two-level constant elasticity of substitution (CES) production function. Our major findings are fivefold. First, at the aggregated one-sector level, the elasticity of substitution between intermediate goods and unskilled labor is 1.22, which is significantly greater than that between intermediate goods and skilled labor of 1.05, indicating intermediate goods-skill complementarity. Second, at the disaggregated level, such complementarity is primarily observed in heavy manufacturing industries and the service sector, whereas complementarity is observed between intermediate goods and unskilled labor in the primary sector and light manufacturing industries. Third, the normalization of the data and the cumulant estimators exhibit stronger results. Fourth, our baseline results are confirmed applying several robustness checks, such as switching skilled and unskilled labor or considering capital-skill complementarity. Finally, intermediate goods-skill complementarity tends to be higher for industries that use more imported intermediate goods.

Japan is a unique country that has experienced issues such as deflation and a declining and ageing population ahead of other developed countries. The same is true of international economic issues. For example, while many countries have recently experienced trade conflicts with the United States, Japan had already encountered such issues in the 1950s. Several studies have examined these issues. Their findings could help us to understand current international economic problems. However, recent studies do not necessarily reflect this knowledge due to a lack of comprehensive literature surveys. Based on this background, this paper reviews empirical studies on Japanese trade and foreign direct investment (FDI). The purpose of this review is to clarify the knowledge gained from previous studies on Japanese trade and FDI as well as to identify gaps in our understanding. In doing so, the paper proposes some directions for future research on trade and FDI in Japan, other advanced countries, and other Asian countries.

This paper examines the determinants of the demand for female workers, focusing on the role of information and communication technology (ICT) and offshoring. Estimating a system of variable factor demands for manufacturing industries between 1980 and 2011, we find that, whereas the ICT capital stock has significantly positive effects on the demand for low-, middle-high-, and high-skilled female workers, it has significantly negative effects on the demand for middle-low-skilled female workers. In contrast, offshoring has insignificant effects on the demand for female workers, which suggests that offshoring is at least neutral on the demand for female workers.

While Japan's outward FDI stock is historically high, it is not necessarily clear whether there is untapped growth potential, given the economic size of Japan and that of partner countries. This paper examines whether Japan's actual outward FDI stock is high or low relative to the FDI predicted by the gravity model using the outward FDI patterns of all OECD nations, which we call counterfactual FDI. The results indicate that the ratio of Japan's actual to counterfactual FDI is the highest among the OECD countries as of the year 2015. The regional distribution of Japan's actual to counterfactual FDI favors Southeast Asian nations, South Africa and the US. These results imply that Japan has no unrealized potential for outward FDI.

This paper examines the theoretically ambiguous relationship between the volatility of employment growth and the foreign exposure of firms. We employ unique Japanese firm-level data during the period of 1994 to 2012. This allows us to investigate any differences in this relationship across multinational firms and trading and non-trading firms, manufacturing and wholesale trade and intra-firm and inter-firm trade. One major finding is that, in manufacturing, employment volatility increases as the share of intra-firm exports to total sales increases. In contrast, in wholesale trade, employment volatility declines as the share of intra-firm imports to total imports increases. One possible interpretation of these results is that the transmission of foreign supply and demand shocks could be through not only manufacturing but also wholesale trade firms. Further, a higher share of intra-firm trade could magnify foreign demand shocks in manufacturing and could mitigate foreign supply shocks in wholesale trade.

Is the gravity model as applicable to trade in intermediate inputs as it is to trade in final goods? One of the contributions of this paper is that we explicitly account for the dual nature of products that can be used as either intermediate inputs or final goods. We find that the structural gravity model performs extremely well for describing bilateral trade in final goods and in intermediate inputs. Moreover, this continues to hold even when we focus on a subset of countries in which intermediate inputs trade accounts for a growing share of trade, namely "Factory Asia." However, the gravity model may perform poorly due to model misspecification (i.e., exclusion of intranational trade) and/or sample selection, even after the model considers the dual nature of products. We demonstrate that the poor performance of the gravity model is not attributable to the large trade flow of intermediate inputs, which supports the continued use of the model as these trade flows continue to grow in importance worldwide.

We present a simple framework that allows us to examine the cross-country exporter productivity gap without accessing confidential firm-level data. This gap depends on the three readily available statistics: the productivity gap between two countries; the export participation rates; and export premia. This gap holds irrespective of the distribution underlying firm productivity and irrespective of the presence of fixed costs. Under specific conditions, allocative efficiency may affect the exporter productivity gap. The empirical analysis globally validates this exercise. (JEL F1, D24).