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Why Has the Border Effect in the Japanese Machinery Sectors Declined?: The Role of Business Networks in East Asian Machinery Trade

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Author Info

  • Fukao, Kyoji

    ()
    (Hitotsubashi University)

  • Okubo, Toshihiro

    ()
    (Keio University)

Abstract

This paper analyzes the impact of firm networks on Japan’s national border effect. We estimate gravity equations using data on Japan’s international and interregional trade in four machinery industries (electrical, general, precision and transportation machinery). The machinery sector is the most important manufacturing sector for exports and outward foreign direct investment (FDI) in Japan. By taking into account international as well as interregional firm networks, we find that ownership relations usually enhance exports from parent firms to establishment. Consequently we can explain 15% (7%, 1% and 0.5%) of the decline in Japan’s border effect from 1980 to 1995 in precision (transportation, general electrical) machinery sector by the increase of international networks.

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Bibliographic Info

Article provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.

Volume (Year): 26 (2011)
Issue (Month): ()
Pages: 651-671

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Handle: RePEc:ris:integr:0553

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Web page: http://econo.sejong.ac.kr/
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Related research

Keywords: Gravity Model; Border Effect; Firm Networks; Fragmentation;

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References

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  1. Ahn, Sanghoon & Fukao, Kyoji & Ito, Keiko, 2009. "The Impact of Outsourcing on the Japanese and South Korean Labor Markets: International Outsourcing of Intermediate Inputs and Assembly in East Asia," CEI Working Paper Series 2008-27, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
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  8. Okubo, Toshihiro, 2000. "The Border Effect in the Japanese Market: Gravity Model Analysis," Discussion Papers 2000-08, Graduate School of Economics, Hitotsubashi University.
  9. Mitsuyo Ando & Fukunari Kimura, 2005. "The Formation of International Production and Distribution Networks in East Asia," NBER Chapters, in: International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14, pages 177-216 National Bureau of Economic Research, Inc.
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  16. Edward Balistreri & Russell Hillberry, 2006. "Trade frictions and welfare in the gravity model: how much of the iceberg melts?," Canadian Journal of Economics, Canadian Economics Association, vol. 39(1), pages 247-265, February.
  17. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  18. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
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Cited by:
  1. Toshihiro OKUBO & Fukunari KIMURA & Nozomu TESHIMA, 2013. "Asian Fragmentation in the Global Financial Crisis," Working Papers DP-2013-38, Economic Research Institute for ASEAN and East Asia (ERIA).

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