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Why Has the Border Effect in the Japanese Market Declined?

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Author Info
Kyoji Fukao; Toshihiro Okubo () (IUHEI, The Graduate Institute of International Studies, Geneva)

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Abstract

This paper analyzes the causes of the decline in Japan’s border effect by estimating gravity equations for Japan’s international and interregional trade in four machinery industries (electrical, general, precision, and transportation machinery). In the estimation, we explicitly take account of firms’ networks. We find that ownership relations usually enhance trade between two regions (countries), and also find that we can explain 35% of the decline in Japan’s border effect from 1980 to 1995 in the electrical machinery industry by the increase of international networks. JEL Classification numbers: F14; F17; F21; L14.

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Paper provided by Economics Section, The Graduate Institute of International Studies in its series HEI Working Papers with number 12-2004.

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Length: 28
Date of creation: Dec 2004
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Handle: RePEc:gii:giihei:heiwp12-2004

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Related research
Keywords: Gravity Model; Border Effect; Networks.;

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  4. Combes, Pierre-Philippe & Lafourcade, Miren & Mayer, Thierry, 2003. "Can Business and Social Networks Explain the Border Effect Puzzle?," CEPR Discussion Papers 3750, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Robert C. Feenstra, . "Integration Of Trade And Disintegration Of Production In The Global Economy," Department of Economics 98-06, California Davis - Department of Economics. [Downloadable!]
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  6. Hummels, David & Levinsohn, James, 1995. "Monopolistic Competition and International Trade: Reconsidering the Evidence," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 799-836, August. [Downloadable!] (restricted)
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  7. Falvey, Rodney E., 1981. "Commercial policy and intra-industry trade," Journal of International Economics, Elsevier, vol. 11(4), pages 495-511, November. [Downloadable!] (restricted)
  8. Rice, Patricia & Stewart, Martin & Venables, Anthony J., 2002. "The Geography of Intra-Industry Trade: Empirics," CEPR Discussion Papers 3368, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  10. Baldwin, Richard & Okubo, Toshihiro, 2004. "Heterogeneous Firms, Agglomeration and Economic Geography: Selection and Sorting," CEPR Discussion Papers 4602, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  16. Markusen, James R. & Venables, Anthony J., 2000. "The theory of endowment, intra-industry and multi-national trade," Journal of International Economics, Elsevier, vol. 52(2), pages 209-234, December. [Downloadable!] (restricted)
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  17. Greaney, Theresa M., 2003. "Reverse importing and asymmetric trade and FDI: a networks explanation," Journal of International Economics, Elsevier, vol. 61(2), pages 453-465, December. [Downloadable!] (restricted)
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  18. Andrew Bernard & Stephen Redding & Peter Schott, 2004. "Comparative advantage and heterogeneous firms," IFS Working Papers W04/24, Institute for Fiscal Studies. [Downloadable!]
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  19. Gould, David M, 1994. "Immigrant Links to the Home Country: Empirical Implications for U.S. Bilateral Trade Flows," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 302-16, May. [Downloadable!] (restricted)
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  24. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November. [Downloadable!] (restricted)
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  25. Keith Head & John Ries, 1998. "Immigration and Trade Creation: Econometric Evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 47-62, February.
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