Pitfalls of location choice analysis : the finished goods producer versus the intermediate goods producer

In literature related to firm location choice, estimation equations are derived from the model of finished goods producers, but producer types are generally not considered. Research presented in this paper shows that the use of equations derived from such models against intermediate goods producers results in several problems.

Market Access and Intermediate Goods Trade

The role of importer access to the finished goods market in intermediate goods trade is examined by estimating the gravity-like equation derived from the NEG model. Importer access to demand for finished goods is calculated by using the estimates in the gravity equation for finished goods trade, and then intermediate goods trade is regressed on the importer access. Results indicate that imports of intermediate goods are sensitive not only to the magnitude of importer demand for finished goods but also to the demand of neighboring countries. Using results of the regression, the impact of US finished goods market expansion on intermediate goods trade in each country is simulated.

Chapter 1 Market Access and Intermediate Goods Trade

This paper examines a distinctive feature of intermediate goods trade which the traditional gravity equation fails to capture, i.e., intermediate goods trade is positively related not only to the importing country's demand for finished goods but also to its neighbors' demand for finished goods. We regress a gravity equation for finished goods trade in the first step. Then, introducing the importing country's access to the total demand for finished goods which is calculated by using the estimates in the first step, we regress our gravity equation for trade in intermediate goods. Our regression results confirm such a feature of intermediate goods trade. Using the results of the regression, we simulate how the rise of US consumers' demand for finished goods affects the total imports and exports of intermediate goods in each country.

Bilateral tariff rates in international trade : finished goods versus intermediate goods

In this paper, we examined back-and-forth international transactions through tariff reduction by estimating modified gravity equations for finished goods and intermediate goods separately. Our main findings are as follows. Exports of finished machinery products are negatively associated with not only the importer's tariff rates on finished machinery products but also the exporter's tariff rates on machinery parts. Similarly, exports of machinery parts are negatively associated with not only the importer's tariff rates on machinery parts but also the exporter's tariff rates on finished machinery products. These results imply that tariff reduction in only one production process in an industry has the potential to drastically change the magnitude of trade in the whole industry.

The rise and fall in the price of food, fuel and manufactured goods : interdependency between prices and technology determining comparative advantages and development paths

Green innovation, which enables us to extract energy from food crops, caused a food shortage in 2008. Countries suffering severe damage started to reconsider their agricultural policy with the aim of becoming more autonomous. The food price hike of the time looks like a reversal of the celebrated Singer-Prebisch thesis proposed in the 1950s. This paper examines the consequences of this trend on the comparative advantages and development strategies of developing countries. For that purpose, first, trends and short-run fluctuations in the prices of fuel and bio-energy crops are investigated. It is shown that the price series of fuels and the crops are synchronized only after the fuel extracting technology came into effect. Second, the reversal of the Singer-Prebisch thesis is underpinned by the generic form of an endogenous growth model developed by Rebelo (1991). It is shown that as an economy grows, appreciation of the non-reproducible, such as mineral resources and raw labor, over the reproducible, such as capital goods, is the norm rather than an anomaly. Third, the consequences of the food price hike and underlying capital accumulation on the development strategies of labor-abundant and low-income countries are explored. It is concluded that the impact of the food price hikes on the alteration of a development strategy is only incremental, without reinforcement from raw-labor-saving innovation. A case study of inventions by JUKI Corporation, a world-leader in the sewing machine market exemplifies the fact that, of all the major inventions the company have made, raw-labor-saving inventions have not dominated, although JUKI's machines are sold to one of the most raw-labor-intensive industries.

On the variety of Mexico's export goods

This paper examines the evolution of the variety of Mexico’s export goods using disaggregated trade data. Both the econometric estimation analyses using the raw data and the one using an improved version of Feenstra and Kee's (2004, 2007) methodology proposed in this paper show that NAFTA membership does not enhance the variety of Mexico's export goods. This finding contrasts with NAFTA's positive association with the increase in export variety found in the literature.

What best transfers knowledge? : capital, goods, and innovative labor in East Asia

This paper compares three knowledge carriers—trade, foreign direct investment (FDI), and inventors—as knowledge mediums, and investigates their effects on knowledge flow in East Asia from 1996 to 2010. Using patent citations as a proxy for knowledge flow, this paper shows that FDI and inventor mobility have positive effects on increasing patent citations in East Asia when the technological portfolios of two countries are less similar. While trade shows statistical significance, the effect is inconsistent according to the regression models.

Stability of complementarity between Japanese FDI and import of intermediate goods : agglomeration effects and parent-firm heterogeneity

This paper examines the duration of intermediate goods imports and its determinants for Japanese affiliates in China. Our estimations, using a unique parent-affiliate-transaction matched panel dataset for a discrete-time hazard model over the 2000–2006 period, reveal that products with a higher upstreamness index, differentiated goods, and goods traded under processing trade are less likely to be substituted with local procurement. Firms located in more agglomerated regions with more foreign affiliates tend to shorten the duration of imports from the home country. For parent-firm characteristics, multinational enterprises that have many foreign affiliates or longer foreign production experience import intermediate goods for a longer duration.