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An empirical evaluation of the 1986 Semiconductor Trade Arrangement

  • Park, Sangin
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    In the paper, we aim to empirically evaluate the extent to which the 1986 Semiconductor Trade Arrangement (STA) affected the Japanese producers' behavior in the market for the 1Â M Dynamic Random Access Memory (DRAM) chips. Based on the Euler equation of non-Japanese firms' learning-curve optimization, we estimate the marginal cost function and then calculate Japanese price-cost margins by using nonparametric estimation. Our estimation results show that the price-cost margins of Japanese firms were set far above the learning-curve optimization margins but still lower than the marginal costs on average. Hence we can infer that the STA could not push the price above the average Japanese marginal cost but facilitate the Japanese firms to collude to set the price-cost margins by taking account of learning-by-doing effects. This empirical finding and no significant spillover effect are combined with other observations to imply that the STA might have enabled later-entering non-Japanese firms to rapidly expand their market shares and get a foot in the door of the R&D competition for new generational DRAM.

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    Article provided by Elsevier in its journal Japan and the World Economy.

    Volume (Year): 21 (2009)
    Issue (Month): 4 (December)
    Pages: 349-357

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    Handle: RePEc:eee:japwor:v:21:y:2009:i:4:p:349-357
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505557

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    1. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
    2. Ohashi, Hiroshi, 2005. "Learning by doing, export subsidies, and industry growth: Japanese steel in the 1950s and 1960s," Journal of International Economics, Elsevier, vol. 66(2), pages 297-323, July.
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    10. Irwin, Douglas A & Klenow, Peter J, 1994. "Learning-by-Doing Spillovers in the Semiconductor Industry," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1200-1227, December.
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    17. Dick, Andrew R, 1991. "Learning by Doing and Dumping in the Semiconductor Industry," Journal of Law and Economics, University of Chicago Press, vol. 34(1), pages 133-59, April.
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