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Why Has the Border Effect in the Japanese Market Declined?: The Role of Business Networks in East Asia

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  • Kyoji Fukao
  • Toshihiro Okubo

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.

Suggested Citation

  • Kyoji Fukao & Toshihiro Okubo, 2004. "Why Has the Border Effect in the Japanese Market Declined?: The Role of Business Networks in East Asia," Hi-Stat Discussion Paper Series d03-24, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hst:hstdps:d03-24
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    References listed on IDEAS

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    1. 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.
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    3. Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact of Outsourcing and High-Technology Capital on Wages: Estimates For the United States, 1979–1990," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 907-940.
    4. Keiko Ito & Kyoji Fukao, 2005. "Physical and Human Capital Deepening and New Trade Patterns in Japan," NBER Chapters,in: International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14, pages 7-52 National Bureau of Economic Research, Inc.
    5. 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.
    6. Toshihiro Okubo, 2004. "Intra-industry Trade and Production Networks," IHEID Working Papers 13-2004, Economics Section, The Graduate Institute of International Studies.
    7. Kyoji Fukao & Tomohiko Inui & Hiroki Kawai & Tsutomu Miyagawa, 2004. "Sectoral Productivity and Economic Growth in Japan, 1970-98: An Empirical Analysis Based on the JIP Database," NBER Chapters,in: Growth and Productivity in East Asia, NBER-East Asia Seminar on Economics, Volume 13, pages 177-228 National Bureau of Economic Research, Inc.
    8. Kyoji Fukao & Goushi Kataoka & Arata Kuno, 2003. "How to Measure Non-tariff Barriers? A Critical Examination of the Price-Differential Approach," Hi-Stat Discussion Paper Series d03-08, Institute of Economic Research, Hitotsubashi University.
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    11. 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.
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    Citations

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    Cited by:

    1. Toshihiro Okubo, 2006. "Trade Bloc Formation in Interwar Japan --Gravity Model Analysis-- (forthcoming in Journal of the Japanese and International Economies)," IHEID Working Papers 03-2006, Economics Section, The Graduate Institute of International Studies.
    2. Miren Lafourcade & Elisenda Paluzie Hernandez, 2005. "European Integration, FDI and the Internal Geography of Trade: Evidence from Western European Border Regions," Working Papers in Economics 145, Universitat de Barcelona. Espai de Recerca en Economia.
    3. Hitoshi Sasaki & Yuko Koga, 2005. "Trade Patterns in Japan's Machinery Sector," Bank of Japan Working Paper Series 05-E-15, Bank of Japan.

    More about this item

    Keywords

    Gravity Model; Border Effect; Networks;

    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

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