IDEAS home Printed from https://ideas.repec.org/p/hst/ghsdps/gd11-197.html
   My bibliography  Save this paper

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

Author

Listed:
  • Kyoji Fukao
  • Toshihiro Okubo

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.

Suggested Citation

  • Kyoji Fukao & Toshihiro Okubo, 2011. "Why Has the Border Effect in the Japanese Machinery Sectors Declined? The Role of Business Networks in East Asian Machinery Trade," Global COE Hi-Stat Discussion Paper Series gd11-197, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hst:ghsdps:gd11-197
    as

    Download full text from publisher

    File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd11-197.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Okubo, Toshihiro, 2004. "The border effect in the Japanese market: A Gravity Model analysis," Journal of the Japanese and International Economies, Elsevier, vol. 18(1), pages 1-11, March.
    2. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade Not War?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(3), pages 865-900.
    3. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    4. Fukao, Kyoji & Ishido, Hikari & Ito, Keiko, 2003. "Vertical intra-industry trade and foreign direct investment in East Asia," Journal of the Japanese and International Economies, Elsevier, vol. 17(4), pages 468-506, December.
    5. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    6. Tomiura, Eiichi, 2003. "Changing economic geography and vertical linkages in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 17(4), pages 561-581, December.
    7. Richard Baldwin & Daria Taglioni, 2006. "Gravity for Dummies and Dummies for Gravity Equations," NBER Working Papers 12516, National Bureau of Economic Research, Inc.
    8. Richard E. Baldwin, 2008. "Managing The Noodle Bowl: The Fragility Of East Asian Regionalism," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 53(03), pages 449-478.
    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, pages 177-216, National Bureau of Economic Research, Inc.
    10. Ekholm, Karolina & Hakkala, Katariina, 2005. "The Effect of Offshoring on Labor Demand: Evidence from Sweden," Working Paper Series 654, Research Institute of Industrial Economics.
    11. Yoko Sazanami & Shujiro Urata & Hiroki Kawai, 1995. "Measuring the Costs of Protection in Japan," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 32, January.
    12. Robert E. Lipsey & Eric D. Ramstetter & Magnus Blomstrom, 2000. "Outward FDI and Parent Exports and Employment: Japan, the United States, and Sweden," NBER Working Papers 7623, National Bureau of Economic Research, Inc.
    13. Robert Z. Lawrence, 1987. "Imports in Japan: Closed Markets or Minds?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(2), pages 517-554.
    14. Edward J. Balistreri & Russell H. Hillberry, 2006. "Trade frictions and welfare in the gravity model: how much of the iceberg melts?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(1), pages 247-265, February.
    15. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    16. Sanghoon Ahn & Kyoji Fukao & Keiko Ito, 2008. "The Impact of Outsourcing on the Japanese and South Korean Labor Markets: International Outsourcing of Intermediate Inputs and Assembly in East Asia," Global COE Hi-Stat Discussion Paper Series gd08-001, Institute of Economic Research, Hitotsubashi University.
    17. Greaney, Theresa M., 2005. "Measuring network effects on trade: Are Japanese affiliates distinctive?," Journal of the Japanese and International Economies, Elsevier, vol. 19(2), pages 194-214, June.
    18. Lionel Fontagné & Michaël Freudenberg & Nicolas Peridy, 1997. "Trade Patterns Inside the Single Market," Working Papers 1997-07, CEPII research center.
    19. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-623, June.
    20. Takatoshi Ito & Andrew K. Rose, 2005. "International Trade in East Asia," NBER Books, National Bureau of Economic Research, Inc, number ito_05-1, July.
    21. Ito, Takatoshi & Rose, Andrew K. (ed.), 2005. "International Trade in East Asia," National Bureau of Economic Research Books, University of Chicago Press, number 9780226378961.
    22. Toshihiro Okubo, 2007. "Intra‐industry Trade, Reconsidered: The Role of Technology Transfer and Foreign Direct Investment," The World Economy, Wiley Blackwell, vol. 30(12), pages 1855-1876, December.
    23. Andrew K. Rose & Eric van Wincoop, 2001. "National Money as a Barrier to International Trade: The Real Case for Currency Union," American Economic Review, American Economic Association, vol. 91(2), pages 386-390, May.
    24. Hideshi Itoh, 2006. "The Theories of International Outsourcing and Integration : A Theoretical Overview from the Perspective of Organizational Economics," Microeconomics Working Papers 21891, East Asian Bureau of Economic Research.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Baldwin, Richard & Okubo, Toshihiro, 2019. "GVC journeys: Industrialisation and deindustrialisation in the age of the second unbundling," Journal of the Japanese and International Economies, Elsevier, vol. 52(C), pages 53-67.
    2. Okubo, Toshihiro & Kimura, Fukunari & Teshima, Nozomu, 2014. "Asian fragmentation in the Global Financial Crisis," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 114-127.
    3. Hayakawa, Kazunobu, 2017. "Domestic and international border effects: The cases of China and Japan," China Economic Review, Elsevier, vol. 43(C), pages 118-126.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kyoji Fukao & Toshihiro Okubo, 2004. "Why Has the Border Effect in the Japanese Market Declined? The Role of Business Networks in East Asia," Discussion papers 04016, Research Institute of Economy, Trade and Industry (RIETI).
    2. Bo Xiong & John Beghin, 2017. "Does European aflatoxin regulation hurt groundnut exporters from Africa?," World Scientific Book Chapters, in: John Christopher Beghin (ed.), Nontariff Measures and International Trade, chapter 16, pages 287-307, World Scientific Publishing Co. Pte. Ltd..
    3. Bo Xiong & John Beghin, 2013. "Aflatoxin redux: Does European Aflatoxin regulation hurt groundnut exporters from Africa?," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 40(5), pages 895-895, December.
    4. Baldwin, Richard & Okubo, Toshihiro, 2019. "GVC journeys: Industrialisation and deindustrialisation in the age of the second unbundling," Journal of the Japanese and International Economies, Elsevier, vol. 52(C), pages 53-67.
    5. Mateus Silva Chang, 2017. "Machinery production networks in Latin America: a quantity and quality analysis," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 26(1), pages 1-35, December.
    6. Kazunobu Hayakawa, 2007. "Measuring Barriers to International Division of Labor in East Asia," Asian Economic Journal, East Asian Economic Association, vol. 21(2), pages 139-153, June.
    7. Gunes Gokmen, 2012. "Economic Clash? The Role of Cultural Cleavages in Bilateral Trade Relations," EcoMod2012 4252, EcoMod.
    8. (ed.), 0. "Research Handbook on Economic Diplomacy," Books, Edward Elgar Publishing, number 16053, December.
    9. Michele Fratianni & Francesco Marchionne, 2011. "The Limits to Integration," Chapters, in: Miroslav N. Jovanović (ed.), International Handbook on the Economics of Integration, Volume I, chapter 9, Edward Elgar Publishing.
    10. Kristian Behrens & Cem Ertur & Wilfried Koch, 2012. "‘Dual’ Gravity: Using Spatial Econometrics To Control For Multilateral Resistance," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(5), pages 773-794, August.
    11. Gabriel J. Felbermayr & Benjamin Jung & Farid Toubal, 2010. "Ethnic Networks, Information, and International Trade: Revisiting the Evidence," Annals of Economics and Statistics, GENES, issue 97-98, pages 41-70.
    12. Cipollina, Maria & Salvatici, Luca, 2007. "EU and developing countries: an analysis of preferential margins on agricultural trade flows," Working Papers 7219, TRADEAG - Agricultural Trade Agreements.
    13. Chen, Natalie & Novy, Dennis, 2008. "International Trade Integration: A Disaggregated Approach," CEPR Discussion Papers 7103, C.E.P.R. Discussion Papers.
    14. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    15. Ando, Mitsuyo, 2006. "Fragmentation and vertical intra-industry trade in East Asia," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 257-281, December.
    16. Michele Fratianni & Francesco Marchionne, 2012. "Trade Costs and Economic Development," Economic Geography, Taylor & Francis Journals, vol. 88(2), pages 137-163, April.
    17. Yuan Li & John C. Beghin, 2017. "A meta-analysis of estimates of the impact of technical barriers to trade," World Scientific Book Chapters, in: John Christopher Beghin (ed.), Nontariff Measures and International Trade, chapter 4, pages 63-77, World Scientific Publishing Co. Pte. Ltd..
    18. Richard E. Baldwin, 2011. "Multilateralising Regionalism: Spaghetti Bowls as Building Blocks on the Path to Global Free Trade," Chapters, in: Miroslav N. Jovanović (ed.), International Handbook on the Economics of Integration, Volume I, chapter 2, Edward Elgar Publishing.
    19. Khan, Imran Ullah & Kalirajan, Kaliappa, 2011. "The impact of trade costs on exports: An empirical modeling," Economic Modelling, Elsevier, vol. 28(3), pages 1341-1347, May.
    20. Jean-Marc Siroën & Aycil Yucer, 2012. "The impact of MERCOSUR on trade of Brazilian states," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(3), pages 553-582, September.

    More about this item

    Keywords

    Gravity model; Border effect; Firm networks; Fragmentation;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hst:ghsdps:gd11-197. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tatsuji Makino (email available below). General contact details of provider: https://edirc.repec.org/data/iehitjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.