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

  • Kyoji Fukao
  • Toshihiro Okubo

This paper analyzes the causes of the decline in Japan's border effect in four machinery industries (electrical, general, precision, and transportation machinery) by estimating gravity equations for Japan's international and interregional trade. In the estimation, we explicitly take account of firms' networks. We find that ownership relations usually enhance trade between two regions (countries); moreover, we 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.

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File URL: http://hi-stat.ier.hit-u.ac.jp/research/discussion/2007/pdf/D07-238.pdf
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Paper provided by Institute of Economic Research, Hitotsubashi University in its series Hi-Stat Discussion Paper Series with number d07-238.

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Date of creation: Feb 2008
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Handle: RePEc:hst:hstdps:d07-238
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  1. Baldwin, Richard E., 2007. "Managing the Noodle Bowl: The Fragility of East Asian Regionalism," Working Papers on Regional Economic Integration 7, Asian Development Bank.
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  7. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
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  11. 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.
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  14. Mitsuyo Ando & Fukunari Kimura, 2005. "The Formation of International Production and Distribution Networks in East Asia," NBER Chapters, in: International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14, pages 177-216 National Bureau of Economic Research, Inc.
  15. 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.
  16. 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.
  17. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade Not War?," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 865-900.
  18. 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, December.
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