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Keiretsu and relationship-specific investment: implications for market-opening trade policy

  • Qiu, Larry D.
  • Spencer, Barbara J.

This paper considers the implications of relationship-specific investment within keiretsu for policies aimed at opening the Japanese market for intermediate goods, such as auto parts. Both VIEs applied to parts and VERs restricting Japanese exports of autos cause the keiretsu to import a wider range of parts, but of a relatively unimportant type, such as seat covers. Since keiretsu investment and output fall, the total value of U.S. parts exports may actually fall. For a given value of these exports, a VIE is less costly for U.S. consumers and Japanese producers, but a VER is preferred by U.S. automakers.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 58 (2002)
Issue (Month): 1 (October)
Pages: 49-79

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Handle: RePEc:eee:inecon:v:58:y:2002:i:1:p:49-79
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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