Measuring fixed costs for firms' use of a free trade agreement : threshold regression approach

In this paper, by employing the threshold regression method, we estimate the average tariff equivalent of fixed costs for the use of a free trade agreement (FTA) among all existing FTAs in the world. It is estimated to be 3.2%. This global estimate serves as a reference rate in the evaluation of each FTA’s fixed costs.

The role of Preferential Trade Agreements (PTAs) in facilitating global production networks

This paper examines the effects of preferential trade agreements (PTAs) in facilitating international trade flows connecting production networks. We consider over 250 PTAs with trade flows distinguished into parts and components and final goods for the period 1979-2008. The gravity equation estimates suggest that the concurrent year effects of PTA formation on trade in parts and components are unseen, whereas PTAs have positive and pervasive effects on both types of trade flows 6 and 9 years after the PTA formation.

Chapter 8 Location Choice of Japanese Multinationals: Country Characteristics or Region Characteristics?

In the present global era in which firms choose the location of their plants beyond national borders, location characteristics are important for attracting multinational enterprises (MNEs). The better access to countries with large market is clearly attractive for MNEs. For example, special treatments on tariffs such as the Generalized System of Preferences (GSP) are beneficial for MNEs whose home country does not have such treatments. Not only such country characteristics but also region characteristics (i.e. province-level or city-level ones) matter, particularly in the case that location characteristics differ widely between a nation's regions. The existence of industrial concentration, that is, agglomeration, is a typical regional characteristic. It is with consideration of these country-level and region-level characteristics that MNEs decide their location abroad. A large number of academic studies have investigated in what kinds of countries MNEs locate, i.e. location choice analysis. Employing the usual new economic geography model (i.e. constant elasticity of substitution (CES) utility function, Dixit-Stiglitz monopolistic competition, and ice-berg trade costs), the literature derives the profit function, of which coefficients are estimated using maximum likelihood procedures. Recent studies are as follows: Head, Rise, and Swenson (1999) for Japanese MNEs in the US; Belderbos and Carree (2002) for Japanese MNEs in China; Head and Mayer (2004) for Japanese MNEs in Europe; Disdier and Mayer (2004) for French MNEs in Europe; Castellani and Zanfei (2004) for large MNEs worldwide; Mayer, Mejean, and Nefussi (2007) for French MNEs worldwide; Crozet, Mayer, and Mucchielli (2004) for MNEs in France; and Basile, Castellani, and Zanfei (2008) for MNEs in Europe. At the present time, three main topics can be found in this literature. The first introduces various location elements as independent variables. The above-mentioned new economic geography model usually yields the profit function, which is a function of market size, productive factor prices, price of intermediate goods, and trade costs. As a proxy for the price of intermediate goods, the measure of agglomeration is often used, particularly the number of manufacturing firms. Some studies employ more disaggregated numbers of manufacturing firms, such as the number of manufacturing firms with the same nationality as the firms choosing the location (e.g., Head et al., 1999; Crozet et al., 2004) or the number of firms belonging to the same firm group (e.g., Belderbos and Carree, 2002). As part of trade costs, some investment climate measures have been examined: free trade zones in the US (Head et al., 1999), special economic zones and opening coastal cities in China (Belderbos and Carree, 2002), and Objective 1 structural funds and cohesion funds in Europe (Basile et al., 2008). Second, the validity of proxy variables for location elements is further examined. Head and Mayer (2004) examine the validity of market potential on location choice. They propose the use of two measures: the Harris market potential index (Harris, 1954) and the Krugman-type index used in Redding and Venables (2004). The Harris-type index is simply the sum of distance-weighted real GDP. They employ the Krugman-type market potential index, which is directly derived from the new economic geography model, as it takes into account the extent of competition (i.e. price index) and is constructed using estimators of importing country dummy variables in the well-known gravity equation, as in Redding and Venables (2004). They find that "theory does not pay", in the sense that the Harris market potential outperforms Krugman's market potential in both the magnitude of its coefficient and the fit of the model to be estimated. The third topic explores the substitution of location by examining inclusive values in the nested-logit model. For example, using firm-level data on French investments both in France and abroad over the 1992-2002 period, Mayer et al. (2007) investigate the determinants of location choice and assess empirically whether the domestic economy has been losing attractiveness over the recent period or not. The estimated coefficient for inclusive value is strongly significant and near unity, indicating that the national economy is not different from the rest of the world in terms of substitution patterns. Similarly, Disdier and Mayer (2004) investigate whether French MNEs consider Western and Eastern Europe as two distinct groups of potential host countries by examining the coefficient for the inclusive value in nested-logit estimation. They confirm the relevance of an East-West structure in the country location decision and furthermore show that this relevance decreases over time. The purpose of this paper is to investigate the location choice of Japanese MNEs in Thailand, Cambodia, Laos, Myanmar, and Vietnam, and is closely related to the third topic mentioned above. By examining region-level location choice with the nested-logit model, I investigate the relative importance of not only country characteristics but also region characteristics. Such investigation is invaluable particularly in the case of location choice in those five countries: industrialization remains immature in those countries which have not yet succeeded in attracting enough MNEs, and as a result, it is expected that there are not yet crucial regional variations for MNEs within such a nation, meaning the country characteristics are still relatively important to attract MNEs. To illustrate, in the case of Cambodia and Laos, one of the crucial elements for Japanese MNEs would be that LDC preferential tariff schemes are available for exports from Cambodia and Laos. On the other hand, in the case of Thailand and Vietnam, which have accepted a relatively large number of MNEs and thus raised the extent of regional inequality, regional characteristics such as the existence of agglomeration would become important elements in location choice. Our sample countries seem, therefore, to offer rich variations for analyzing the relative importance between country characteristics and region characteristics. Our empirical strategy has a further advantage. As in the third topic in the location choice literature, the use of the nested-logit model enables us to examine substitution patterns between country-based and region-based location decisions by MNEs in the concerned countries. For example, it is possible to investigate empirically whether Japanese multinational firms consider Thailand/Vietnam and the other three countries as two distinct groups of potential host countries, by examining the inclusive value parameters in nested-logit estimation. In particular, our sample countries all experienced dramatic changes in, for example, economic growth or trade costs reduction during the sample period. Thus, we will find the dramatic dynamics of such substitution patterns. Our rigorous analysis of the relative importance between country characteristics and region characteristics is invaluable from the viewpoint of policy implications. First, while the former characteristics should be improved mainly by central government in each country, there is sometimes room for the improvement of the latter characteristics by even local governments or smaller institutions such as private agencies. Consequently, it becomes important for these smaller institutions to know just how crucial the improvement of region characteristics is for attracting foreign companies. Second, as economies grow, country characteristics become similar among countries. For example, the LCD preferential tariff schemes are available only when a country is less developed. Therefore, it is important particularly for the least developed countries to know what kinds of regional characteristics become important following economic growth; in other words, after their country characteristics become similar to those of the more developed countries. I also incorporate one important characteristic of MNEs, namely, productivity. The well-known Helpman-Melitz-Yeaple model indicates that only firms with higher productivity can afford overseas entry (Helpman et al., 2004). Beyond this argument, there may be some differences in MNEs' productivity among our sample countries and regions. Such differences are important from the viewpoint of "spillover effects" from MNEs, which are one of the most important results for host countries in accepting their entry. The spillover effects are that the presence of inward foreign direct investment (FDI) aises domestic firms' productivity through various channels such as imitation. Such positive effects might be larger in areas with more productive MNEs. Therefore, it becomes important for host countries to know how much productive firms are likely to invest in them. The rest of this paper is organized as follows. Section 2 takes a brief look at the worldwide distribution of Japanese overseas affiliates. Section 3 provides an empirical model to examine their location choice, and lastly, we discuss future works to estimate our model.

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.

Non-conventional provisions in regional trade agreements : do they enhance international trade?

The scope of recent regional trade agreements (RTAs) is becoming much wider in terms of including several provisions such as competition policy or intellectual property. This paper empirically examines how far advanced, non-conventional provisions in RTAs increase trade values among RTA member countries, by estimating the gravity equation with more disaggregated indicators for RTAs. As a result, we find that the provision on competition policy has the largest impacts on trade values, following that on government procurement. Our further analysis reveals that the more significant roles of these two provisions can be also observed in the impacts on the intensive and extensive margins.

Openness and economic growth

The themes of this thesis are that international trade and foreign direct investment (FDI) are closely related and that they have varying impacts on economic growth in countries at different stages of development. The thesis consists of three empirical studies. The first one examines the causal relationship between FDI and trade in China. The empirical study is based on a panel of bilateral data for China and 19 home countries/regions over the period 1984-98. The specific feature of the study is that econometric techniques designed specially for panel data are applied to test for unit roots and causality. The results indicate a virtuous procedure of development for China. The growth of China’s imports causes growth in inward FDI from a home country/region, which in turn causes the growth of exports from China to the home country/region. The growth of exports causes the growth of imports. This virtuous procedure is the result of China’s policy of opening to the outside world. China has been encouraging export-oriented FDI and reducing trade barriers. Such policy instruments should be further encouraged in order to enhance economic growth. In the second study, an extended gravity model is constructed to identify the main causes of recent trade growth in OECD countries. The specific features include (a) the explicit introduction of R&D and FDI as two important explanatory variables into an augmented gravity equation; (b) the adoption of a panel data approach, and (c) the careful treatment of endogeneity. The main findings are that the levels and similarities of market size, domestic R&D stock and inward FDI stock are positively related to the volume of bilateral trade, while the geographical distance, exchange rate and relative factor endowments, has a negative impact. These findings lend support to new trade, FDI and economic growth theories. The third study evaluates the impact of openness on growth in different country groups. This research distinguishes itself from many existing studies in three aspects: first, both trade and FDI are included in the measurement of openness. Second, countries are divided' into three groups according to their development stages to compare the roles of FDI and trade in different groups. Third, the possible problems of endogeneity and multicollinearity of FDI and trade are carefully dealt with in a panel data setting. The main findings are that FDI and trade are both beneficial to a country's development. However, trade has positive effects on growth in all country groups but FDI has positive effects on growth only in the country groups which have had moderate development. The findings suggest FDI and trade may affect growth under different conditions.

Investigating the effect of geographical distances and cultural proximity on the Hungarian wine trade

Wine is a very special product from an economic, cultural, and sociological point of view. Wine culture and wine trade play an important role in Hungary. The effect of cultural and geographical proximity on international trade has already been proven in the international trade literature. The size of bilateral trade flows between any two countries can be approximated by the gravity theory of trade. The gravity model provides empirical evidence of the relationship between the size of the economies, the distances between them, and their trade. This paper seeks to analyse the effect of cultural and geographical proximity on Hungary’s bilateral wine trade between 2000 and 2012, employing the gravity equation. The analysis is based on data from the World Bank WITS, WDI, as well as CEPII, and WTO databases. I apply OLS, Random Effects, Poisson, Pseudo-Poisson-Maximum-Likelihood and Heckman two stage estimators to calculate the gravity regression. The results show that in the case of Hungary, cultural similarity and trade liberalisation have a positive impact, while geographical distance, landlockedness, and contiguity have a negative impact on Hungarian wine exports.

A földrajzi távolság, a kulturális hasonlóság és a szabadkereskedelem hatása a borkereskedelemre = Effects on the global wine trade of geographical distance, cultural and linguistic similarity, and free trade

A globalizálódó világgazdaságban a vezető bortermelő országok egyre jelentősebb borkereskedelmet bonyolítanak le egymás között. Míg Európában a fogyasztók egyre kevesebb bort vásárolnak, addig Amerikában és Ázsiában a bor iránti kereslet folyamatosan bővül: a borkereskedelem földrajzi átrendeződése zajlik. A kulturális hasonlóság és a földrajzi távolság kereskedelemre gyakorolt hatását gyakran a kereskedelemelméletek gravitációs modelljével elemzik. E tanulmány azt vizsgálja, hogy a fő borexportáló országok közötti földrajzi távolság, kulturális hasonlóság és szabadkereskedelem milyen hatással van a nemzetközi borkereskedelemre, annak költségeire. A regressziós becslés eredményei alátámasztják, hogy a borkereskedelem költségei alacsonyabbak, ha a kereskedelmi partnerek kulturálisan hasonlók, földrajzilag közel helyezkednek el egymáshoz, vagy van tengeri kikötőjük, tagjai a WTO-nak, illetve ha kötöttek egymással regionális kereskedelmi megállapodást. Ezenkívül megállapítható, hogy az angolszász, a latin-amerikai és az európai kulturális klaszterek elsősorban egymással kereskednek. A kutatás számos kulturális változó alkalmazásával és több ökonometriai modell, illetve becslési eljárás nagymintás tesztelésével gazdagítja a szakirodalmat. ____ In a globalizing world, major wine-producing countries export considerable quantities to the global wine market and turn over a notable trade, but in what happens European wine regions differ markedly from the New World. Here major wine producers suffered a remarkable fall in domestic wine consumption in recent decades, while New World wine producers increased their production potential and generated new foreign demand. The changes have been joined by geographical relocation of wine consumption and exports. The gravity equation can be derived from demand-side or supply-side theory-consistent estimation methods that suggest relationships between the size of the economies, geographical distances, cultural similarities, and size of their trade. The paper analyses the effects of cultural and geographical proximity, free trade, and linguistic similarity on bilateral trade in the main wine-producing countries, using a cross-section gravity model for 2012. The results suggest that larger countries export more wine, while transport costs rise in line with geographical distance and are higher for landlocked trading partners. Wine export costs are lower if trading partners are culturally similar, share a dominant religion, or are both WTO members with regional trade agreements. Anglo-Saxon, Germanic, Latin American and Latin European countries mainly trade wines within their groups. The paper looks to extend the number of trading partners, investigate the effect of language clusters, and confirm that the results are robust by different econometric methodologies.

Free surface flow into a horizontal slot with zero gravity

The two-dimensional free surface flow of a finite-depth fluid into a horizontal slot is considered. For this study, the effects of viscosity and gravity are ignored. A generalised Schwarz-Christoffel mapping is used to formulate the problem in terms of a linear integral equation, which is solved exactly with the use of a Fourier transform. The resulting free surface profile is given explicitly in closed-form.

Gravity-driven fingering simulations for a thin liquid film flowing down the outside of a vertical cylinder

A numerical study is presented to examine the fingering instability of a gravity-driven thin liquid film flowing down the outer wall of a vertical cylinder. The lubrication approximation is employed to derive an evolution equation for the height of the film, which is dependent on a single parameter, the dimensionless cylinder radius. This equation is identified as a special case of that which describes thin film flow down an inclined plane. Fully three-dimensional simulations of the film depict a fingering pattern at the advancing contact line. We find the number of fingers observed in our simulations to be in excellent agreement with experimental observations and a linear stability analysis reported recently by Smolka & SeGall (Phys Fluids 23, 092103 (2011)). As the radius of the cylinder decreases, the modes of perturbation have an increased growth rate, thus increasing cylinder curvature partially acts to encourage the contact line instability. In direct competition with this behaviour, a decrease in cylinder radius means that fewer fingers are able to form around the circumference of the cylinder. Indeed, for a sufficiently small radius, a transition is observed, at which point the contact line is stable to transverse perturbations of all wavenumbers. In this regime, free surface instabilities lead to the development of wave patterns in the axial direction, and the flow features become perfectly analogous to the two-dimensional flow of a thin film down an inverted plane as studied by Lin & Kondic (Phys Fluids 22, 052105 (2010)). Finally, we simulate the flow of a single drop down the outside of the cylinder. Our results show that for drops with low volume, the cylinder curvature has the effect of increasing drop speed and hence promoting the phenomenon of pearling. On the other hand, drops with much larger volume evolve to form single long rivulets with a similar shape to a finger formed in the aforementioned simulations.

On entanglement entropy functionals in higher-derivative gravity theories

In arXiv:1310.5713 1] and arXiv:1310.6659 2] a formula was proposed as the entanglement entropy functional for a general higher-derivative theory of gravity, whose lagrangian consists of terms containing contractions of the Riemann tensor. In this paper, we carry out some tests of this proposal. First, we find the surface equation of motion for general four-derivative gravity theory by minimizing the holographic entanglement entropy functional resulting from this proposed formula. Then we calculate the surface equation for the same theory using the generalized gravitational entropy method of arXiv:1304.4926 3]. We find that the two do not match in their entirety. We also construct the holographic entropy functional for quasi-topological gravity, which is a six-derivative gravity theory. We find that this functional gives the correct universal terms. However, as in the R-2 case, the generalized gravitational entropy method applied to this theory does not give exactly the surface equation of motion coming from minimizing the entropy functional.

Single Curved Fiber Sedimentation Under Gravity

Dynamics of single curved fiber sedimentation under gravity are simulated by using the lattice Boltzmann method. The results of migration and rotation of the curved fiber at different Reynolds numbers are reported. The results show that the rotation and migration processes are sensitive to the curvature of the fiber. (c) 2007 Elsevier Ltd. All rights reserved.

Single curved fiber sedimentation under gravity

Dynamics of single curved fiber sedimentation under gravity are simulated by using the lattice Boltzmann method. The results of migration and rotation of the curved fiber at different Reynolds numbers are reported. The results show that the rotation and migration processes are sensitive to the curvature of the fiber. (c) 2007 Elsevier Ltd. All rights reserved.

Steady capillary-gravity waves on deep water

The properties of capillary-gravity waves of permanent form on deep water are studied. Two different formulations to the problem are given. The theory of simple bifurcation is reviewed. For small amplitude waves a formal perturbation series is used. The Wilton ripple phenomenon is reexamined and shown to be associated with a bifurcation in which a wave of permanent form can double its period. It is shown further that Wilton's ripples are a special case of a more general phenomenon in which bifurcation into subharmonics and factorial higher harmonics can occur. Numerical procedures for the calculation of waves of finite amplitude are developed. Bifurcation and limit lines are calculated. Pure and combination waves are continued to maximum amplitude. It is found that the height is limited in all cases by the surface enclosing one or more bubbles. Results for the shape of gravity waves are obtained by solving an integra-differential equation. It is found that the family of solutions giving the waveheight or equivalent parameter has bifurcation points. Two bifurcation points and the branches emanating from them are found specifically, corresponding to a doubling and tripling of the wavelength. Solutions on the new branches are calculated.

Fermionic zero modes in gauge and gravity backgrounds on T-2

Here we study fermionic zero modes in gauge and gravity backgrounds taking a two-dimensional compact manifold T-2 as extra dimensions. The result is that there exist massless Dirac fermions which have normalizable zero modes under quite general assumptions about these backgrounds on the bulk. Several special cases of gauge background on the torus are discussed and some simple fermionic zero modes axe obtained.