Welfare and Equity Impacts of Cross-Border Factor Mobility in Bangladesh: A General Equilibrium Analysis

Bangladesh is one of the top remittance recipient countries in the world and it is the second largest source of the country’s foreign exchange earnings. However, in recent years, remittance inflows into Bangladesh have declined steadily because of real income reductions of migrants. This trend in income has increased the number of returning migrants, making domestic employment less secure. To address this issue, we develop a recursive dynamic CGE model for Bangladesh that describes the allocation of employment between domestic and foreign labor markets in response to a foreign wage premium, competition between local firms and multinational enterprises in the ready-made garments (RMG) sector, and distributional impacts of factor mobility on different household groups. Our simulation results show that returning migrants reduce household welfare by lowering wages and increasing unemployment, particularly for unskilled workers in the domestic labor market. Using counteractive policy options, we examine the impacts of FDI promotion in the RMG sector and of a human-capital development program. Based on our results, we conclude that the former policy minimizes the negative impacts of foreign labor market shocks, while a combination of both policies is more equitable.JEL Classification Codes: C68, F21, F22, O15It is gratefully acknowledged that this study was supported by the JSPS KAKENHI Grants (18J11669 and 16K03613).http://www.grips.ac.jp/list/jp/facultyinfo/hosoe_nobuhiro

Productivity Shocks and National Food Security for Japan

Agriculture is the focus of much contention in free trade negotiations. The Japanese government is against liberalizing the rice trade on the grounds that it would threaten "national food security" in the events of such shocks as crop failure, war, and embargo. Trade liberalization is expected to make Japan more dependent upon food imports and to make the Japanese economy more susceptible to these risks. Using a stochastic computable general equilibrium model, we conducted Monte Carlo simulations to quantify impact of rice productivity shocks and export quotas by major rice exporters to Japan and found little chance for trade liberalization for Japan to suffer from such shocks.

A Spatial Equilibrium Analysis of Transmission Charge Reform in Japan's Electric Power Industry

A key intention of the regulatory reform of transmission charge schemes on Japan's electric power market was to promote inter-regional competition between power suppliers by lowering long-distance transmission charges with a postage-stamp charge scheme. This can lead to extensive use of inter-regional links and cause congestion. Congestion segments the market into several regional markets, making the reform less successful. We developed a nine-region spatial equilibrium model to simulate the reform at the peak-load hour. We found the reform would lead to significant increases of inter-regional transmission and congestion at the link between the 50-Hz area and the 60-Hz area.

Productivity Shocks and National Food Security for Japan (Japanese)

Agriculture is the focus of much contention in free trade negotiations. The Japanese government is against liberalizing the rice trade on the grounds that it would threaten "national food security" in the events of such shocks as crop failure, war, and embargo. Trade liberalization is expected to make Japan more dependent upon food imports and to make the Japanese economy more susceptible to these risks. Using a stochastic computable general equilibrium model, we conducted Monte Carlo simulations to quantify impact of rice productivity shocks and export quotas by major rice exporters to Japan and found little chance for trade liberalization for Japan to suffer from such shocks.

Measuring Effects of Competition on Retail Power Charges in Public Procurement Bidding (Japanese)

Deregulation in the electric power industry has been aimed at promoting competition, thereby enhancing the industry's efficiency. We use public bidding data from procurements of electric power supply service to study the impact of the reform on the retail supply sector in Japan. We quantify this impact by measuring a decline in power charges controlling the endogeneity bias due to service providers' decisions on whether or not to bid. Our results suggest that power charges are likely to decline by about 0.46 yen/kWh on average when two or more providers bid.

Regional Electric Power Demand in Japan (Japanese)

In assessment and review of regulatory reforms of the electric power market, price elasticity is one of the most important parameters which characterize the market. However, people have seldom estimated the elasticity for Japan but have just assumed it as small as 0.1 or zero without examining empirical validity of such a priori assumptions. We estimated regional power demand functions for nine regions to quantify the elasticity and found short-run price elasticity be 0.06627-0.32551 and long-run price elasticity be 0.11326-0.69075. Inter-regional comparison of our estimation results suggests price elasticity in rural regions is larger than that in urban regions. Popular assumptions of small elasticity like 0.1 could fit for Japan's aggregate power demand but would not fit for power demand functions focusing on respective regions. Furthermore, assumptions with smaller elasticity values like 0.01 and zero could not be statistically supported.

Economic De-integration in North America and Foreign Direct Investment from Japan

We investigate the impact of US steel and aluminum tariffs, and the resumption of auto tariffs under the revised North American Free Trade Agreement, on trade in North America and foreign direct investment (FDI) from Japan, from the perspective of the auto industry. The results of policy simulation analyses with a recursive dynamic computable general equilibrium model are as follows. Canada and Mexico would benefit from US steel and aluminum tariffs, being alternative trade partners with both the US and other countries. Due to the auto tariffs on intra-North America exports, Canada and Mexico would lose a large part of the windfall benefits from the US steel and aluminum tariffs. Japan’s FDI in Canada and Mexico would fall sharply. The more de-integrated North American economies become, the more Japan would regain its auto production, although at a painful cost in terms of welfare. That negative welfare impact would be neutralized by abolition of auto tariffs with the US.This study is partly supported by JSPS KAKENHI (Nos. 16H0360, 19K01622). Firm-level data in the Survey on Overseas Business Activities are provided by the Japanese Ministry of Economy,Trade and Industry.http://www.grips.ac.jp/list/jp/facultyinfo/hosoe_nobuhiro

Japanese Manufacturing Facing the Power Crisis after Fukushima: A Dynamic Computable General Equilibrium Analysis with Foreign Direct Investment

経済学 / EconomicsThe Great East Japan Earthquake and the subsequent tsunami hit and destroyed the Fukushima Daiichi Nuclear Power Station. People lost trust in the safety of nuclear power plants, and the regulatory authority became reluctant to permit power companies to restart their nuclear power plants. To make up for the lost nuclear power supply, thermal power plants started operating more. They consume more fossil fuels, which raises power charges. This power crisis is anticipated to raise energy input costs and to force the domestic manufacturing industries to move out to, for example, China through foreign direct investment (FDI). Using a world trade computable general equilibrium model, with recursive dynamics installed to describe both domestic investment and FDI from Japan to China, we simulate the power crisis by assuming lost capital stock and intensified fossil fuel use by the power sector to investigate its impact on the Japanese manufacturing sectors. We found that the power crisis would adversely affect several sectors that use power intensively but would benefit the transportation equipment, electric equipment, and machinery sectors, despite the common expectation that these sectors would undergo a so-called “hollowing-out.”http://www.grips.ac.jp/list/jp/facultyinfo/hosoe_nobuhiro

Can the Japanese Agri-food Sectors Survive by Promoting their Exports?: A General Equilibrium Analysis with Farm Heterogeneity and Product Differentiation

Manufacturing industries have attracted research attention regarding roles of firm heterogeneity and product differentiation in the new new trade theory. Agricultural sectors also produce new goods by product differentiation through breeding, food processing, quality-upgrading, and branding. In reaction to the recent globalization, the Japanese government has sought strategies to promote its domestic agri-food sectors by means of product differentiation and export promotion. This computable general equilibrium study examines the relevance of these policies by simulating hypothetical trade liberalization in agriculture and/or food. We show that agricultural trade liberalization would not increase Japan s agricultural exports but would increase food exports; and that food trade liberalization would promote food exports. Both types of liberalization would increase domestic production in agri-food sectors through agri-food linkages and variety effects. This finding affords evidence of the relevance of product differentiation strategy through food processing and exportation, but not of agricultural export promotion strategy.This study is partly supported by JSPS KAKENHI grant (Nos. 16K03613, 16K07907, 16KT0036, 19K01622).http://www.grips.ac.jp/list/jp/facultyinfo/hosoe_nobuhiro

How much can foreign multinationals affect the Chinese economy? A dynamic general equilibrium analysis of Japanese FDI

経済学 / EconomicsWe analyze the impacts of a sharp fall of Japanese foreign direct investment (FDI) to China that occurred after the worldwide financial crisis in 2009. The study is conducted by means of a three-region (Japan, China, and the rest of the world (ROW)) recursive dynamic computable general equilibrium (CGE) model with multinational enterprises (MNEs) driven by FDI. Our simulation experiment showed that the FDI fall would cause price rises of Japanese affiliates’ goods and a depreciation of the renminbi. These two forces with the FDI fall would heavily reduce exports and production of Japanese MNE affiliates, while increasing those in Chinese manufacturing. This, however, does not mean that China would be a gainer, because it would experience a contraction in its service sector. Its losses in its service sector would exceed the gains in the manufacturing sectors. Therefore, overall China would lose due to the FDI fall.JEL Classification Codes: C68, F21, F23, F17http://www.grips.ac.jp/list/jp/facultyinfo/hosoe_nobuhiro