Agglomeration and wage bargaining

This paper examines the role of trade union and the type of wage bargainings in economic geography model. In our setting, wage bargaining is held between immobile workers and mobile entrepreneurs who decide the location of their firm. It is shown that stronger trade unions in both regions would put a stronger pressure toward agglomeration of firms. This is due to the fact that the stronger bargaining power of trade union makes home market effect larger. Under core-periphery distribution of firms, this effect can act the role as anchorage of firms. Stronger trade unions in home region can keep the firms remain in their region. Moreover, we extend to several employment environments, which are the outside option of workers. We show that differences in bargaining structures and employment environments could affect the stability of symmetrically distributed firms, namely symmetry break point. We show that while unemployment rate acts as a centripetal force, not only the degree of bargaining power of trade union but also unemployment benefit can play as a centrifugal force. A key message of the paper is that generous unemployment benefit and higher trade union make the distribution of firms more uneven and sustainable.Labour market rigidity, Regional Unemployment, Location of firms, Anchorage effect of trade union

Location and organization choice of firms

We construct a two-region model of monopolistic competition with mobile entrepreneurs. Typical implicit assumption on increasing returns to scale sector is that firms can produce and sale only at one place. We explicitly introduce multi-plant case and examine location equilibrium with decreasing transpiration costs. The difference between single-plant and multi-plant firms lies in export-fixed cost and set-up fixed cost of multi-plant. We find that at certain transportation costs, firms change their organization type from multi-plant to single-plant and, with further decrease in transportation costs, firms concentrate in one region.Economic Integration, Organization of Production, Horizontal FDI, Export Fixed Cost, Transaction Cost

Myopic or farsighted : bilateral trade agreements among three symmetric countries

We examine network formation via bilateral trade agreement (BTA) among three symmetric countries. Each government decides whether to form a link or not via a BTA depending on the differential of ex-post and ex-ante sum of real wages in the country. We model the governmental decision in two forms, myopic and farsighted and analyze the effects on the BTA network formation. First, we find that both myopic and farsighted games never induce the formation of star networks nor empty networks. Second, the networks resulting from myopic game coincides with those resulting from farsighted games.International trade, International agreements, Trade policy, Endogenous network formation, Bilateral trade agreement, Myopic and farsighted behavior

Agglomeration and directional imbalance of freight rates : the role of density economies in the transport sector

This paper examines the conventional assumption that bilateral transport costs are symmetric. We develop an economic geography model with transport sector in which asymmetric freight rates can occur as a result of density economies. Comparing this to models without density economies, we show that agglomeration of economic activities is more likely to emerge and that multiple equilibria can emerge for some parameters. Then we show the change in its bifurcation and stability of equilibrium and conclude that economies of density in transport flows can act as an agglomeration force

Multiplant strategy under core-periphery structure

A typical implicit assumption on monopolistic competition models for trade and economic geography is that firms can produce and sell only at one place. This paper fallows endogenous determination of the number of plants in a new economic geography model and examine the stable outcomes of organization choice between single-plant and multi-plant in two regions. We explicitly consider the firms\u27 trade-off between larger economies of scale under single plant configuration and the saving in interregional transport costs under multi-plant configuration. We show that organization change arises under decreasing transportation costs and observe several organization configurations under a generalized cost function

Location choice in low-income countries : evidence from Japanese investments in East Asia

Unlike most existing studies, this paper examines the location choices of MNEs in developing countries. Specifically, we investigate the location choices of Japanese MNEs among East Asian developing countries by estimating a four-stage nested logit model at the province level. Noteworthy results of location elements are as follows. As is consistent with the mechanics of cheap labor-seeking FDI, Japanese MNEs are more likely to invest in locations with low income and low tariff rates on products from Japan. Also, accessibility to other locations and/or ports matters in attracting Japanese MNEs because it is crucial in importing materials and exporting their products. In addition, WTO membership and bilateral investment treaties are important because these contribute to the settlement of trade and investment disputes, which is more likely to be necessary in developing countries.Southeast Asia, China, Japan, Malaysia, Indonesia, Cambodia, Laos, Myanmar, Vietnam, Thailand, Philippines, Foreign investments, Industrial management, Location Choice, Multinational Firms, Nested-logit Model

Myopic or farsighted : bilateral trade agreements among three symmetric countries

We examine network formation via bilateral trade agreement (BTA) among three symmetric countries. Each government decides whether to form a link or not via a BTA depending on the differential of ex-post and ex-ante sum of real wages in the country. We model the governmental decision in two forms, myopic and farsighted and analyze the effects on the BTA network formation. First, we find that both myopic and farsighted games never induce the formation of star networks nor empty networks. Second, the networks resulting from myopic game coincides with those resulting from farsighted games

Location choice in low-income countries : evidence from Japanese investments in East Asia

Unlike most existing studies, this paper examines the location choices of MNEs in developing countries. Specifically, we investigate the location choices of Japanese MNEs among East Asian developing countries by estimating a four-stage nested logit model at the province level. Noteworthy results of location elements are as follows. As is consistent with the mechanics of cheap labor-seeking FDI, Japanese MNEs are more likely to invest in locations with low income and low tariff rates on products from Japan. Also, accessibility to other locations and/or ports matters in attracting Japanese MNEs because it is crucial in importing materials and exporting their products. In addition, WTO membership and bilateral investment treaties are important because these contribute to the settlement of trade and investment disputes, which is more likely to be necessary in developing countries

Some notes on the spatial representations

There are conventional methods to calculate the centroid of spatial units and distance among them with using Geographical Information Systems (GIS). The paper points out potential measurement errors of this calculation. By taking Indian district data as an example, systematic errors concealed in such variables are shown. Two comparisons are examined; firstly, we compare the centroid obtained from the spatial units, polygons, and the centre of each city where its district headquarters locates. Secondly, between the centres represented in the above, we calculate the direct distances and road distances obtained from each pair of two districts. From the comparison between the direct distances of centroid of spatial units and the road distances of centre of district headquarters, we show the distribution of errors and list some caveats for the use of conventional variables obtained from GIS

Directional imbalance of freight rates : evidence from Japanese inter-prefectural data

By analyzing a comprehensive dataset on transport transactions in Japan, we describe a directional imbalance in freight rates by transport mode and examine its potential sources, such as economies of density and directionally imbalanced transport flow. There are certain numbers of observed links which show asymmetric transport costs. Instrumental variable analysis is used to show that economies of density account for deviation from symmetric freight rates between prefectures. Our results show that a 10% increase in outbound transport flow relative to inbound transport flow leads to a 2.1% decrease in outbound freight rate relative to inbound freight rate