TCER Working Paper Series


New TCER Research

February 2024
Purchase or Generate? An Analysis of Energy Consumption, Co-generation and Substitution Possibilities in Energy Intensive Manufacturing Plants under the Japanese Feed-in-Tariff

Aline Mortha and Toshi H. Arimura
As the manufacturing industry is one of the largest contributors to global emissions, decarbonization of the production line is a key aspect in the fight against climate change. In this study, we examine the level of substitutability between fossil fuel and electricity. Using data on Japanese plants from 2004 to 2020, we estimate the elasticity of substitution between the two inputs, and find that a 1% increase in electricity prices results in a 6.55% increase in fossil fuel consumption. This is a unilateral form of substitution, as an increase in fossil fuel price does not translate in any significant changes in electricity consumption in the short-run. Our paper also contributes to explaining mechanisms behind inter-fuel substitution, with a special focus on electricity and fossil fuel through cogeneration. We find that substitutability is highly sector-dependent, and identify the pulp & paper, iron & steel, chemicals and cement to be sectors with substitution capacity. These sectors see an increase in their electricity generation, the magnitude of which is estimated between 0.004% (cement) to 0.23% (iron & steel). Iron & steel and cement also increase their consumption of coal to power generators by 0.06% and 0.005%, respectively.
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January 2024
Demographics Outlook, Credit Conditions, and Property Prices

Chihiro Shimizu, Yongheng Deng, Tomoo Inoue and Kiyohiko Nishimura
Many developed countries have experienced prolonged economic stagnation in the aftermath of property bubbles bursting. Such observations have led people to believe that economic stagnation accompanied by property bubbles has longer and more severe consequences than other forms of economic stagnation. This study conducts an empirical analysis to challenge this hypothesis and suggest that demographics are closely related to other aspects of long-term economic stagnation. Using panel data from 17 countries from 1974 to 2018, we investigate the residential property price dynamics by incorporating demographic factors and considering the interaction of those demographics with credit conditions. Our results shed new light on the importance of demographic factors in modeling the long-run equilibrium of residential property prices. We find that the effect of nominal interest rates determined by monetary policy on asset prices varies depending on the country and the degree of population aging at the time. We also find that persistently optimistic population projections lead to the over-supply of residential stocks in rapidly aging countries, resulting in stagnant residential property markets. We demonstrated that ignoring the demographic and credit factors in the dynamics may lead to misjudgment of the long-run equilibrium conditions and incorrect policy decisions.
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January 2024
Product Churn and Quality Adjustment

Chihiro Shimizu and W. Erwin Diewert
High technology products are characterized by the rapid introduction of new models and the corresponding disappearance of older models. The paper addresses the problems associated with the construction of price indexes for these products. Several methods for the quality adjustment of product prices are considered: hedonic regressions that use either product characteristics (Time Dummy Characteristics regressions) or the product itself as the ultimate characteristic (Time Product Dummy regressions). The paper also considered regressions where the economic importance of products is taken into account (weighted versus unweighted regressions). The indexes which were generated by the hedonic regressions were compared to traditional index numbers that did not make any special adjustments for quality change. Finally, the Expanding Window variant of a Weighted Time Product Dummy regression was used to deal with the chain drift problem. The various approaches were implemented using Japanese price and quantity data on laptop sales in Japan for the 24 months over the years 2020-2021.
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December 2023
Strategic Responses Under Increasing Uncertainty: Flight Cancellation Decisions by Domestic Airlines

Ryuya Ko and Hiroshi Ohashi
In this study, we assess the influence of strategic interaction on airlines' decisions to cancel flights amid the heightened uncertainty of the early Covid-19 pandemic in Japanese domestic market. Airlines were compelled to modify their operations, predominantly through the cancellation of scheduled flights. Leveraging a novel dataset comprising airlines' public announcement, we examine the timing and magnitude of flight cancellation by integrating with data on the progression of the pandemic and the enactment of public policies. Our analysis of cancellation practices of airlines indicates that the risk of infections significantly influenced airline cancellations; specifically, an increase in the infection risk by 30% is correlated with a 10% rise in the cancellation rate during the early period of the pandemic. Additionally, our results reveal that strategic interaction also relates to the dynamics of flight cancellation decisions. The hazard rate of cancellation event is more than 30% lower in duopoly market, while it gets closer to that of monopoly market as the departure date approaches, which is in line with the implication of the war of attrition.
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December 2023
Heterogeneous Risk Attitudes and Waves of Infection

Taisuke Nakata, Daisuke Fujii and Takeshi Ojima
Many countries have experienced multiple waves of infection during the COVID-19 pandemic. We propose a novel but parsimonious extension of the SIR model, a CSIR model, that can endogenously generate waves. In the model, cautious individuals take appropriate prevention measures against the virus and are not exposed to infection risk. Incautious individuals do not take any measures and are susceptible to the risk of infection. Depending on the size of incautious and susceptible population, some cautious people lower their guard and become incautious—thus susceptible to the virus. When the virus spreads sufficiently, the population reaches “temporary” herd immunity and infection subsides thereafter. Yet, the inflow from the cautious to the susceptible eventually expands the susceptible population and leads to the next wave. We also show that the CSIR model is isomorphic to the SIR model with time-varying parameters.

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December 2023
COVID-19 and Suicide in Japan

Taisuke Nakata, Daisuke Fujii, Quentin Batista and Takeki Sunakawa
We quantify the effects of the COVID-19 crisis on suicides in Japan using a time-series model relating the number of suicides to the unemployment rate as well as private-sector forecasts of the unemployment rate before the crisis. We find that (i) the COVID-19 crisis increased suicides in Japan by about 7,000 from March 2020 to April 2022, (ii) the increase in the unemployment rate can only account for one third of the excess suicides, (iii) the excess suicides are skewed towards younger generations and female, and (iv) lost years of life expectancy associated with the excess suicides are almost as large as those associated with COVID-19 deaths.

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December 2023
Understanding Cross-Country Heterogeneity in Health and Economic Outcomes during the COVID-19 Pandemic: A Revealed-Preference Approach

Taisuke Nakata, Daisuke Fujii, Sohta Kawawaki, Yuta Maeda and Masataka Mori
There is a large heterogeneity in health and macroeconomic outcomes across countries during the COVID-19 pandemic. We present a novel framework to understand the source of this heterogeneity, combining an estimated macro-epidemiological model and the idea of revealed preference. Our framework allows us to decompose the difference in health and macroeconomic outcomes across countries into two components: preference and constraint. We find that there is a large heterogeneity in both components across countries and that some countries such as Japan or Australia are willing to accept a large output loss to reduce the number of COVID-19 deaths.
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December 2023
The Effects of Hosting the Olympic and Paralympic Games on COVID-19 in Tokyo: Ex-Ante Analyses

Taisuke Nakata, Daisuke Fujii, Asako Chiba, Yuta Maeda, Masataka Mori, Kenichi Nagasawa and Wataru Okamoto
We present a series of quantitative analyses conducted from mid-May of 2021 to mid-June of 2021 that examined the effects of hosting the Tokyo 2020 Olympic and Paralympic Games on the spread of COVID-19 in Tokyo. Our ex-ante quantitative analyses pointed out that (i) the direct effects on the spread of COVID-19 of welcoming Games-related foreign visitors to Japan or allowing spectators in competition venues would be either limited or manageable, but (ii) a festive mood generated by the Games could greatly contribute to the spread of COVID-19 if it led to a decline in people’s willingness to take preventive actions against infection. Ex-post, the key results of our ex-ante analyses are broadly in line with available circumstantial evidence as well as ex-post consensus by public-health experts on how the Games affected the spread of COVID-19 in Tokyo.

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December 2023
Cross-Regional Heterogeneity in Health and Economic Outcomes during the COVID-19 Pandemic: An Analysis of Japan

Taisuke Nakata, Daisuke Fujii, Shotaro Beppu, Kohei Machi, Yuta Maeda, Hiroyuki Kubota and Haruki Shibuya
Health and macroeconomic outcomes varied substantially across prefectures in Japan during the COVID-19 crisis. Using an estimated macro-epidemiological model as well as the idea of revealed preference, we compute the marginal rate of substitution (MRS) and the conditional trade-off curve between health and economic outcomes in each prefecture. We find that there is a large heterogeneity in the MRS as well as the location and shape of the conditional trade-off curve.
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December 2023
Vaccine Uptake - Geographic Psychology or the Information Field?

Peter Romero, Eisaku Daniel Tanaka, Yuki Mikiya, Shinya Yoshino, Atsushi Oshio and Teruo Nakatsuma
Rapid vaccine uptake is a crucial component of public health, and contributes towards a stable economy. While previous research shows influences from spatial distribution of personality, and temporal influences of the information field, we integrate both by help of a suggested framework. Partial evidence for the framework is delivered by a subsequent Japan-wide analysis of the influence of spatial personality and spatiotemporal changes in the information field. More concretely, we analyse 25,614,106 hyperlocal Tweets from 2019 to 2021 that cover all prefectures of Japan using J-LIWC2015, 14,418 responses to the TIPI-J collected between 2012 and 2019, 6,266 responses to the Japanese version of NEO-FFI and a COVID-19-vaccine-related questionnaire that covers cognitive, affective, and behavioural items. We offer three models that predict mid-term vaccine uptake, long-term vaccine uptake, and abidance by governmental measures. Results indicate that vaccine uptake speed is predicted by temporal distribution of the information field, geospatial distribution of agent and contextual personality (Extraversion), presence of severe COVID-19 cases, and agent belief systems. More concretely, relevant language (negative emotions, affected language, anxiety, risk-related language) that implies close proximity (family-related language), the presence of severe COVID-19 cases, contextual and agent Extraversion, as well as agent beliefs that vaccines are justified, predict vaccine uptake speed and abidance by governmental measures. For analysis, we suggest a semi-manual statistical feature reduction approach that allows injection of theoretical consideration by chaining traditional steps of statistics and statistical learning with human selection of final predictors. We then discuss possibilities to include our findings for enhancing vaccine acceptance, shaping better public health behaviors, customising and precisely targeting government communications to counter misinformation, fostering a healthier and more resilient society, as well as a more stable economy.
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December 2023
Optimal Income Taxation and Formalization of the Informal Economy

Hirofumi Takikawa
Tax revenues, particularly in developing countries, play a crucial role in driving economic development, and formalizing the informal economy offers significant potential for raising revenues, given the large size of the informal economy and the limited role of personal income taxes in tax collection. However, effective formalization also requires sufficient redistributive incentives for a smooth transition to the formal economy. By addressing both formalization and redistribution simultaneously, this study examines the impact of formalizing the informal economy on an optimal tax schedule using an extended Mirrlees model, and identifies an optimal tax formula that incorporates formalization of the informal economy. Quantitative analysis shows that formalization increases tax revenue and income transfers when the tax schedule is optimized together with formalization. Conversely, these benefits diminish when the tax schedule remains unchanged and is not fine-tuned for formalization. This study improves our understanding of the informal economy and provides valuable insights into the implications for designing optimal tax policies with formalization.
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September 2023
Social Norms in Individual Pro-environmental Practices in the Workplace

Mari Sakudo, Toshi H. Arimura and Hajime Katayama
While a number of researchers analyze pro-environmental behavior in households, the study on individuals’ energy and resource conservation practices in the workplace is still in the early stage. Paying a particular attention to social norms in the workplace, this paper estimates a structural model of the social interactions in individuals’ decisions to engage in environmentally friendly practices in the workplace using data from a Japanese survey. Accounting for endogeneity that stems from simultaneity, common shocks and nonrandom group selection, we find some influence of social norms on individuals’ pro-environmental behavior in the workplace.
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August 2023
“Invisible Killer”: Seasonal Allergies and Accidents

Hitoshi Shigeoka and Mika Akesaka
Although at least 400 million people suffer from seasonal allergies worldwide, the adverse effects of pollen on “non-health” outcomes, such as cognition and productivity, are relatively understudied. Using ambulance archives from Japan, we demonstrate that high pollen days are associated with increased accidents and injuries—one of the most extreme consequences of cognitive impairment. We find some evidence of avoidance behavior in buying allergy products but limited evidence in curtailing outdoor activity, implying that the cognitive risk of pollen exposure is discounted. Our results call for governmental efforts to raise public awareness of the risks and promote widespread behavioral change.
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July 2023
Toward the rebuilding of modern macroeconomic theory: Market failure and Keynes’ unemployment equilibrium

Eizo Kawai
This study perceives an unacceptable unreality of a macro price mechanism: i.e., the unreality that under any severe recession, worsening deflation, or a consistent decline in the rate of inflation will lead an economy to full employment equilibrium. This unreality is a result of an arbitrary assumption that the micro price mechanism operates even in a macroeconomy: a fallacy of composition. This study challenges the modern macroeconomics theories on price mechanism and unemployment based on the skepticism toward existing theories.
This study gets the following two conclusions: First, in a macroeconomy, market failure occurs because the price mechanism does not function, especially under deflation. Consequently, even if nominal values are sufficiently flexible, steady-state and thus full employment equilibrium do not hold. In other words, there is no macro general equilibrium corresponding to a micro general equilibrium. Market failure in a short-run macroeconomy is because of the unavoidable spillover effects, or the derived demand effects between goods and labor markets under disequilibrium from rigid wages and prices. Market failure would occur even in the long-term macroeconomy as an inevitable conjecture from the short-run analysis. For the above analyses, a static model is sufficient, and dynamic models are unnecessary and theoretically unfeasible.
Second, Keynes’ unemployment equilibrium is realized owing to market failure in a macroeconomy. It shows that involuntary unemployment results from quantitative and not price aspects. In other words, the unemployment results from shortage in labor demand under rigid real wages and not under rigidity of real wages.
Final section shows three novel proposals for future contributions of this study’s implications.
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June 2023
Scanner Data, Product Churn and Quality Adjustment

Chihiro Shimizu and Erwin Diewert
High technology products are characterized by the rapid introduction of new models and the corresponding disappearance of older models. The paper addresses the problems associated with the construction of price indexes for these products. Several methods for the quality adjustment of product prices are considered: hedonic regressions that use either product characteristics or the product itself (Time Product Dummy regressions). The paper also considers regressions where the economic importance of products is taken into account (weighted versus unweighted regressions). Finally, traditional index numbers are calculated that do not make any special adjustments for quality change. The various approaches are implemented using Japanese price and quantity data on laptop sales in Japan for the 24 months in the years 2020-2021. Somewhat surprisingly, the "best" hedonic regression price index was virtually identical to the "best" traditional index.
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April 2023
Theory and Evidence of Firm-to-firm Transaction Network Dynamics

Takafumi Kawakubo and Takafumi Suzuki
How are supply chains formed and restructured over time? This paper investigates firm-to-firm transaction network dynamics from theoretical and empirical perspectives, exploiting large-scale firm-level transaction data from Japan. First, we provide basic facts which show substantial churning in supply chains over time, even after excluding the cases where either supplier or customer firms exit from the market. Second, we empirically find that productivity positive assortative matching between firms exists. Firms are more likely to keep trading with more productive firms and instead stop trading with less productive ones. Alternatively, more productive firms start new transactions with more productive business partners. Lastly, we build a theoretical framework to rationalize these findings. Both supplier and customer firms are heterogeneous and choose their trading partners with many-to-many matching setting. We derive the implications for supply chain formation and restructuring in response to productivity shocks.
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March 2023
Do online communities of practice complement or substitute conventional agricultural extension services? Evidence from Indonesian shrimp farmers’ participation in a Facebook group

Guenwoo Lee, Ayu Pratiwi, Farikhah, Aya Suzuki and Takashi Kurosaki
Using a unique dataset of 1,574 shrimp farmers, this study investigates whether online communities of practice can replace or compensate for traditional agricultural extension services. This study reveals that the correlation between the use of the community and conventional extension services, such as neighboring farmers, family members, and extension workers, is not statistically significant in the full sample. However, on excluding the non-community members, the results indicate that those who obtain information from their neighbors or extension workers are more likely to use the community. Regarding the reliability of the community, those who obtain information from their neighboring farmers or family members are less likely to choose the community as their most reliable source of information. This is consistent with the results obtained after excluding non-community members. Furthermore, we found a negative and statistically significant correlation between the frequency of information sharing and inquiries and information sources such as neighboring farmers and family members, and no association between increased time spent at home due to the COVID-19 pandemic and increased use of the community. The results suggest that online communities of practice may not yet have penetrated farmers in Indonesia and act as a complement to, rather than a substitute for, conventional extension services.
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March 2023
Purchase or generate? An analysis of energy consumption, co-generation and substitution possibilities in energy intensive manufacturing plants under the Japanese Feed-in-Tariff

Aline Mortha and Toshi H. Arimura
To foster domestic electricity production, Japan introduced a Feed-in-Tariff policy in 2012, financed by a renewable levy. This paper examines the impact of this tax on industrial, energy intensive (EI) sectors using plant data from 2005 to 2018. We explore whether the introduction of the levy encouraged plants to substitute electricity purchased from the market with electricity generated on site and whether changes in energy consumption patterns triggered by the levy resulted in additional CO2 emissions from the plants. Our results show that a 1% increase in the levy rate results in a decrease in energy consumption, estimated to be around 3,800 tCO2e per plant on average. However, we also showed that the tax increase also leads to a rise in 0.03pp in the share of electricity generated on site, reflecting a marginal level of substitution between the two energy sources. We identify plants from the chemical sector as those with substitution capacity, and that the substitution leads to increased coal and gas consumption. Our results shed light on the effects of electricity taxes, and highlight the need for carbon pricing. Our paper also contributes to explaining mechanisms behind inter-fuel substitution in the EI sector, with a special focus on electricity and fossil fuel through cogeneration.
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March 2023
Value Premium in Japanese Market: Statistical (Re)appraisal

Leonardo Cadamuro and Tokuo Iwaisako
This paper examines the recent decline of the value premium in the Japanese market since the late 2000s, and discuss similarities and differences between the Japanese and US markets. We adopt the analytical framework of Fama and French (2021) using predictive regression with the book-to-market (BM) ratio and the framework by Arnott et al. (2021) based on the return decomposition of HML returns. The level and volatility of the Japanese BM ratio significantly changed toward the end of 1990s; thus, careful consideration in splitting the sample periods is needed in examining the predicting ability of BM ratio about the portfolio returns sorted by the firm size and BM ratio. We find the predictable component of Japanese HML returns is relatively stable over time, and the recent decline in HML returns is mostly explained by the unpredictable decline in the valuation of value stocks relative to growth stocks after the Global Financial Crisis in the late 2000s. This is consistent with the results reported in existing studies on the US market. The evidence provided by the decomposition of HML returns also supports the findings of this study’s analysis.
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March 2023
Climate change, financial intermediation, and monetary policy

Eisei Ohtaki
Motivated by recent climate actions of central banks and supervisors, this study aims to explore implications of climate change in an economy with financial intermediaries. For this aim, this study develops an overlapping generations model of the environment and financial intermediation. In that model, reactions of financial intermediaries, the monetary steady state, and optimal monetary policy against climate change are studied. Especially, it is demonstrated that the level of the optimal money growth rate depends on how “green” agents are.
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February 2023
Improving the SNA: Alternative Measures of Output, Input, Income and Productivity for China

Chihiro Shimizu, Erwin Diewert and Koji Nomura
The paper defines and computes alternative measures of output, input and Total Factor Productivity (TFP) for the production sector of the Chinese economy. The current System of National Accounts (SNA) input measure that corresponds to Gross Domestic Product (GDP) does not measure the income generated by the production sector since it includes depreciation and excludes capital gains and losses on assets used in the production sector. The paper suggests an accounting framework that addresses these problems with the existing SNA gross income measure and implements a net income measure using the Augmented Productivity Database (APDB) developed by Asian Productivity Organization and Keio University for China over the years 1970-2020. Real gross and real net income generated by the Chinese production sector is decomposed into explanatory factors including TFP growth using the framework suggested by Jorgenson and Diewert and Morrison. TFP growth is further decomposed into technical progress and inefficiency components using the nonparametric approach developed by Diewert and Fox. The APDB has estimates for the price and quantity of agricultural, industrial, commercial and residential land used in China. The paper argues that changes in land use should be treated in the same manner as inventory change and added to the alternative output measures. It turns out that Jorgensonian user costs for land are frequently negative. The problems associated with negative user costs are discussed in the paper.
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February 2023
The welfare effects of partial tariff reduction in Japan

Akihito Asano and Michiru Sakane
When some sectors are more heavily protected than others, will removing lightly protected sectors' tariffs improve welfare? We argue that this second-best question is highly relevant in Japan, wherein its government made some exceptions to the across-the-board tariff elimination during the Trans-Pacific Partnership negotiations. We have calibrated a specific factor model with multiple import-competing sectors to the 2015 Japanese economy and conducted some counterfactual exercises. Although the partial tariff removal policy in question barely affects Japanese welfare, when it is combined with the agricultural sector tariff removal (across-the-board tariff elimination) the effect on Japanese welfare is made positive. Furthermore, the positive welfare effect more than doubles if it is combined with the removal of the subsidy in the agricultural sector. Both of these findings indicate the severity of the existing distortion stemming from the Japanese agricultural sector protection as well as the importance of lowering the protection to render the non-agricultural sector tariff removal meritorious.
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January 2023
Does climate change lead financial instability?: A benchmark result

Eisei Ohtaki
Does climate change lead financial instability? To address this problem, this study builds an overlapping generations model of the environment and money. Contrary to predictions of the majority, it is shown that, under a certain condition, a unique stationary monetary equilibrium exists and is a saddle point. Furthermore, it is shown that the optimal gross rate of money growth, which maximizes the welfare at the stationary monetary equilibrium, exists uniquely and is greater than one.
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January 2023
Climate change and monetary policy

Eisei Ohtaki
Motivated by recent climate actions of central banks and supervisors, this study develops an overlapping generations model of the environment and money and explores a role of monetary policy on climate problems. It is shown that a stationary monetary equilibrium exists uniquely but be suboptimal so that this study explores optimal policies. When a policymaker can control money growth rates only, any monetary policy cannot attain an optimal allocation but a certain positive money growth rate can be the second-best policy. In contrast, when a policymaker can choose tax instruments in addition to money growth rates, there exists a continuum of optimal combinations of money growth rates and tax instruments, which implement an optimal allocation as a stationary monetary equilibrium allocation. These results suggest that, to resolve climate problems, monetary and fiscal authorities need to coordinate with each other.
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December 2022
The Anatomy of the internationalization of the RMG

Ayako Saiki
Using daily data between 2019 and 2021, this study examines the influence of the renminbi (henceforth RMB) on all currencies globally. It finds that the RMB’s influence is significant and the largest among the CNY, USD, GBP, JPY and EUR for ten countries, which we call the “RMB bloc” countries. These are mainly small countries in Africa and Latin America, and their main export products are commodities, particularly minerals. There was no sign of the “RMB bloc” emerging in Asia. In addition, I analyze the determinants for becoming an “RMB bloc” country and find that commodity exports per GDP are the most important and robust determinant. China’s loans are significant but negative, reflecting that China’s overseas loans are exclusively denominated in the US dollar. The overall result shows that there is a long way to go for the RMB to become the third international currency next to the USD and euro. For Asian countries’ currencies, the US dollar’s dominance is unchanged, and China’s influence remains negligible. Countries that are “RMB bloc” are typically small economies with a high dependence on commodity exports.
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September 2022
Who changed food consumption behavior after the COVID-19 pandemic? Empirical analysis of Japanese household spending panel data

Shigeru Matsumoto and Thunehiro OTSUKI
The COVID-19 pandemic has had far-reaching consequences in our daily lives. After the pandemic, we were forced to stay at home, which significantly impacted food consumption behavior. People reduced their consumption of food-away-from-home (FAFH) but increased their consumption of food-at-home (FAH) and food delivery services (FDS). This study aims to demonstrate how food consumption behavior has changed after the COVID-19 outbreak. For this purpose, we analyze the household spending panel data obtained from Macromill, Inc. The data set includes biweekly food spending data from 1,448 households living in Tokyo, Tokai, and Kinki areas. Using the data, we compare household food spending for FAFH, FAH, and FDS before and after the COVID-19 outbreak. Although people shifted from FAFH to FAH and FDS on average following the COVID-19 outbreak, the intensity of the shift varies between sampling periods. Empirical results show that during the state of emergency (the first wave), the average household decreased FAFH expenditure by about 2% year-on-year but increased FDS expenditure by about 1.3%. We further investigate how the intensity of the transition from FAFH to FAH varies across households. Both single-person and single-parent households continued to rely on FAFH after the pandemic, whereas households with parents and children shifted more aggressively from FAFH to FAH than remaining households. These findings suggest that even during the COVID-19 pandemic, households with severe time constraints (single-person households and single-parent households) could not allocate time for meal preparation.
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March 2022
Are SMEs Avoiding Compliance Costs? Evidence from VAT Reforms in Japan

Takafumi Suzuki and Takafumi Kawakubo
This study disentangles the motives behind enterprises’ responses to size-dependent tax regulations by exploiting value-added tax (VAT) reforms in Japan. Tax threshold and tax rate in Japan have changed over the past three decades since the introduction of VAT. We build on the model of Harju et al. (2019) to incorporate various tax reforms and conducted bunching estimation. By using a novel panel of Japanese Census of Manufacture covering the periods of VAT introduction and reforms, we find from the local estimates that the observed output response by enterprises is mainly caused by compliance costs rather than tax rates for small enterprises in Japan. The results suggest that the authorities are encouraged to ease compliance costs while enhancing tax revenue to improve the efficiency of tax design.
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March 2022
Welfare Effects of Fuel Tax and Feebate Policies in the Japanese New Car Market

Tatsuya Abe
This paper examines the efficiency and distributional effects of the fuel tax and feebate policies. I employ a model with households' two-stage decisions on car ownership and utilization and estimate model parameters by combining micro-level data from a household survey and macro-level aggregate data for the Japanese new car markets from 2006 through 2013, with a car price endogeneity being dealt with. Counterfactual analyses show that the Japanese feebate results in a significant increase in social welfare while augmenting environmental externalities. In particular, the rebound effect induced by the feebate cancels out about 7% of the reduction in CO2 emissions that would originally have been attained by the fuel economy improvement. In addition, I find that the fuel tax at the current tax rate in Japan is 1.7 times less costly than the product tax, an alternative feebate scheme considered in the counterfactuals, in all income classes to reduce environmental externalities by the same amount, with no difference between the regressivity of the two policies.
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March 2022
Statistical Inference in Evolutionary Dynamics

Ryoji Sawa
We introduce evolutionary dynamics for two-action games where agents with diverse preferences use statistical inference to guide their behavior. We show that the dynamic converges to a Bayesian sampling equilibrium with statistical inference (SESI) and the set of Bayesian SESIs is globally asymptotically stable. We discuss the global convergence to a unique Bayesian SESI in anti-coordination games, a welfare-improving tax scheme, equilibrium selection in coordination games, an application to the diffusion of behavior on networks, and the extension of heterogeneity to the inference procedures.
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March 2022
Impact of the Feed-in-Tariff Exemption on Energy Consumption in Japanese Industrial Plants

Aline Mortha, Naonari Yajima and Toshi H. Arimura
To promote renewable energy deployment, Japan introduced a feed-in tariff policy in 2012, financed through a surcharge on electricity prices for consumers. The Japanese government also offered a discount system for electricity-intensive industrial plants, exempting them from paying full surcharges. Using monthly plant-level data from 2005 to 2018, this study evaluated the exemption system’s impact on electricity and fossil fuel consumption for plants in the iron and steel, chemical products, and pulp and paper sectors. Our results show that the exempted iron and steel plants increased electricity purchase and consumption by 1.06% and 1.04%, respectively. The introduction of electricity efficiency as a new requirement for exemption applications after 2017 did not curb the rebound, as iron, steel, and pulp and paper plants increased their electricity consumption by 1.49% and 0.69%, respectively, after the reform. This result may call for the reform of the exemption system, with the possibility of a lower discount rate or tighter requirements for electricity efficiency.
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February 2022
Multi-Product Establishments and Product Dynamics

Masashige Hamano and Keita Oikawa
The current paper builds a general equilibrium model based on heterogeneous productivities of establishments and heterogeneous tastes at the product level. Establishments choose endogenously their product mix over the business cycle given different income elasticities across products in consumer preferences. We calibrate and estimate the model's shock processes with Japanese data and find that (de)regulation policy at entry, incumbent firms or establishments and each product level provide substantially different outcomes, thereby providing a caveat for policy debate.
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February 2022
Duopolistic Competition and Monetary Policy

Kozo Ueda
This study constructs a tractable duopoly model with price stickiness to consider the strategic pricing of duopolistic firms and its implications for monetary policy. Dynamic strategic complementarity, in which an increase in a firm's price increases the optimal price set by the rival firm in the following periods, increases steady-state price and the real effect of monetary policy. However, when temporary sales arise as a mixed strategy, the real effect of monetary policy decreases considerably.
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January 2022
Consumers' Preferences for Energy-Efficient Air Conditioners in a Developing Country: A Discrete Choice Experiment Using Eco Labels

Miwa Nakai, Majah-Leah V. Ravago, Yoichi Miyaoka, Kiyoshi Saito and Toshi. H Arimura
In this paper, we aim to examine consumer behaviour concerning energy-efficient appliances in the context of a developing country. As a case study, we use the Philippines, one of the earliest countries in Southeast Asia to introduce appliance test standards. We conducted face-to-face surveys of potential purchasers of air conditioners (ACs) in Metropolitan Manila, where the percentage of AC owners has increased as a result of economic growth. The survey includes choice experiment questions to estimate preferences for AC attributes, including purchase price, additional functions, country of manufacturer and energy efficiency information. In addition, we examine the types of information on eco labels that encourage consumers to choose an energy-efficient AC, including the default option of an energy efficiency ratio, estimated cost per hour or an energy star rating. Our choice experiment analysis reveals that energy-efficient ACs made by domestic manufacturers with smart functions are more likely to be chosen by consumers. We find that the probability of an energy-efficient AC being chosen can be increased by approximately 15% if the eco label uses an energy star rating rather than an energy efficiency ratio.
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October 2021
Sectoral inflation persistence, market concentration, and imperfect common knowledge

Ryo Kato, Tatsushi Okuda and Takayuki Tsuruga
Previous studies have stressed that inflation dynamics exhibit substantial dispersion across sectors. Using US producer price data, we present evidence that sectoral inflation persistence is negatively correlated with market concentration, which is difficult to reconcile with the prediction of the standard model of monopolistic competition. To better explain the data, we incorporate imperfect common knowledge into the monopolistic competition model introduced by Melitz and Ottaviano (2008). In the model, pricing complementarity among firms increases as market concentration decreases. Because higher pricing complementarity generates greater inflation persistence, our model successfully replicates the observed negative correlation between inflation persistence and market concentration across sectors.
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September 2021
Optimal Taxation in an Endogenous Fertility Model with Non-Cooperative Couples

Takuya Obara and Yoshitomo Ogawa
This study examines the optimal tax structure in an endogenous fertility model with non-cooperative couples. In the model, both child quality and quantity are suboptimal due to the non-cooperative behavior of couples. Moreover, we consider the external effects of children on society and center-based childcare services. In such a unified model, we characterize the formulas for optimal income tax rates, child tax/subsidy rates, and tax/subsidy rates on center-based childcare services. We find that income taxation, not child subsidy, corrects the suboptimal low fertility level caused by the non-cooperative behavior of couples, and that a child tax can be optimal to alleviate the deadweight loss from income taxation. We also identify the condition under which a child subsidy is needed. The subsidy for external childcare services corrects the external effects of children on society, not the non-cooperative behavior of couples.
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August 2021
Government Debt Maturity in Japan: 1965 to the Present

Junko Koeda and Yosuke Kimura
This study constructs a dataset of Japanese government bonds' maturity structure for the fiscal years 1965–2020. Using the maturity structure data at the end of each fiscal year for the past three decades, this study structurally estimates a canonical preferred-habitat term structure model extracting the bond supply factor. The results provide a debt maturity equation in the fiscal-year cycle and demonstrate that two yield factors (bond supply factor and short-term interest rate) can account for annual-frequency variations in Japanese bond yields. The supply factor also explains the continued decline in the long-term interest rate for the past two decades.
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July 2021
Epidemics and Macroeconomic Dynamics

Masashige Hamano and Munechika Katayama
We propose a novel SIR-macro model in which virus transmission is uncertain. The model is solved with the perturbation method around a deterministic infectious steady state. Assuming a stationary infection process, a positive infection shock increases infection while reducing consumption and hours worked for susceptible individuals. Further, we estimate our model with the recent US data on the COVID-19 outbreak. Historical decomposition obtained with Bayesian techniques finds that the dis-containment rule that encourages people to work more, as well as infection shock and technology shock, play an important role in characterizing US infection and macroeconomic dynamics.
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April 2021
Product Cycles and Prices: a Search Foundation

Mei Dong, Toshiaki Shoji and Yuki Teranishi
This paper develops a price model with product cycles characterized by product entries and exits. Through a frictional product market with search and matching frictions, an endogenous product cycle is accompanied by a price cycle. This model nests the New Keynesian Phillips curve as a special case and generates several new phenomena in business cycle moments with product cycles. Using product-level micro data in Japan, we show that our price model well captures the observed features among product entry, number of products, demand, and price. Our model with a frictional product market replicates correlations between product matching probability and other variables. In a general equilibrium model for the Japanese economy, an endogenous product entry increases a price variation by 23 percent. This number increases to 35 percent with a price discounting after a first price. All results suggest that product cycles and search frictions play fundamental roles in describing price dynamics.
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April 2021
Wholesome Lunch to the Whole Classroom: Short- and Longer-Term Effects on Early Teenagers’ Weight

Shiko Maruyama and Sayaka Nakamura
Previous studies on the effect of school lunch programs on child obesity have been hampered by effect heterogeneity, self-selection, and stigma-induced under-reporting, having produced mixed findings. Their potential long-lasting effect has also been debated. We study the body-weight effect of a Japanese school lunch program, which provides nutritional lunch to all students at participating municipal junior highs. The lack of means testing and individual participation choice offers easily interpretable causal estimates. By exploiting almost all school lunch coverage for elementary school children nationwide, we construct a difference-in-differences (DID) framework to alleviate potential bias due to unobserved differences across municipalities. Using the 1975–1994 National Nutrition Survey, a nationally representative household survey with measured height and weight, we find a regressive benefit of school lunch: while no statistically significant effect is found for the full sample, we find a significant obesity-reducing effect for the subsamples of children with low socioeconomic backgrounds. The obesity-reducing effect remains at least a few years after graduation, implying effect through not only nutritional contents but also guiding healthy eating behavior. We find little evidence that school lunch reduces underweight. Propensity score weighting, quantile DID analysis, and various falsification tests confirm the robustness of our estimates.
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March 2021
Overconfidence, Income-Ability Gap, and Preferences for Income Equality

Daiki Kishishita, Atsushi Yamagishi and Tomoko Matsumoto
The overconfident, who do not actually earn what they think they can, may attribute such cognitive gap to the unfairness of the economy and become favorable of public redistribution when they realize their cognitive bias. We conducted an online survey experiment in the US, where the treatment emphasizing each respondent's self-perception on the income-ability gap is randomly assigned. We found that the treatment lowers overconfident respondents' perception on the fairness of the economy among both left-wing and right-wing people. However, it did not increase the support for reducing income inequality. Instead, this increased support for government intervention to correct the unequal society among the leftists with high trust in the US government.

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March 2021
Welfare gains through globalization: Evidence from Japan’s manufacturing sector

Takahide Aoyagi, Tadashi Ito and Toshiyuki Matsuura
Welfare gains achieved through international trade are a cornerstone of the literature on international economics. However, the data and research methods needed to empirically assess these welfare gains have only recently become available. Building on recently developed methodologies for estimating the elasticity of substitution and computing welfare gains from trade, we estimate Japan's welfare gains from liberalizing trade in the manufacturing sector. To do so, we estimate the elasticities of substitution using Harmonized System (HS) 9-digit product codes, for various periods of time. The analysis shows that the Japan's welfare gains from trade liberalization occurred especially from the 1990s onward, and reached eleven percent vis-à-vis the autarky situation.
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February 2021
Optimal Taxation in an Endogenous Fertility Model with Non-Cooperative Couples

Takuya Obara and Yoshitomo Ogawa
This study examines the optimal tax structure in an endogenous fertility model with non- cooperative couples. In the model, both child quality and quantity are suboptimal due to the non-cooperative behavior of couples. Moreover, we consider the external effects of children on society and center-based childcare services. In such a unified model, we characterize the formulae for optimal income tax rates, child tax/subsidy rates, and tax/subsidy rates on center-based childcare services. We find that income taxation, not child subsidy, corrects the suboptimal low fertility level caused by the non-cooperative behavior of couples. Child tax tends to be optimal as the required tax revenue becomes higher or the degree of external effects of children on society becomes smaller. Specifically, under the availability of lump-sum taxes and absence of externality of children on society, child tax is desirable to alleviate the deadweight loss from income taxation. Moreover, we explore the condition under which a child subsidy is needed. The subsidy for external childcare services corrects the external effects of children on society, not the non-cooperative behavior of couples.
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January 2021
Taylor Rule Yield Curve

Masazumi Hattori, Tomohide Mineyama and Jouchi Nakajima
We propose the Taylor rule yield curve for the United States, which is an extension of the Taylor rule for the short-term policy rate to points in time in the future horizon. The estimated Taylor rule expected rates are useful for considering the monetary policy stance reflected in the entire yield curve, which is valid even during the periods when the federal funds rate (FFR) hits its effective lower bound (ELB). The analysis shows that the Taylor rule deviations (TRDs), the gap between the Taylor rule expected rates and market Overnight Index Swap (OIS) rates, for maturities much longer than overnight could influence the output gap and inflation rates in the United States, even during the period when the FFR hit the ELB for a considerable duration and the Federal Reserve resorted to an unconventional monetary policy. Moreover, the TRDs for long maturities can be regarded as a measure of risk appetite in financial markets. Our methodology in this study can be directly applied for analysis in other countries that experienced similar periods of policy rates hitting their ELBs, as long as data on economists’ forecasts of output and inflation are available.
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January 2021
Stochastic Choice and Social Preferences: Inequity Aversion versus Shame Aversion

Yosuke Hashidate and Keisuke Yoshihara
In this paper, we propose a theory to identify the motivations behind altruistic or prosocial behavior. We focus on inequity aversion and shame aversion as social image concerns. To study these, we characterize two additively perturbed utility models, that is, the sum of expected utility and a non-linear cost function. First, we examine how to distinguish between stochastic inequity-averse behavior and stochastic shame-averse behavior. Next, we show that additively perturbed inequity-averse utility captures the general class of inequity-averse preferences, including ex-ante and ex-post fairness. Finally, we consider the relationship between our models and random utility, one of the most common stochastic choice models.
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December 2020
Estimating a Nonlinear New Keynesian Model with the Zero Lower Bound for Japan

Hirokuni Iiboshi, Mototsugu Shintani and Kozo Ueda
Which type of monetary policy rule best describes the policy conducted by the Bank of Japan during the period when the nominal interest rate is constrained at the zero lower bound (ZLB)? What are the economic fundamentals that explain Japan’s prolonged stagnation? How important is incorporating nonlinearities in the analysis? We answer these questions by estimating a small-scale nonlinear DSGE model. We find that: the Bank of Japan conducted a threshold-based forward guidance policy; adverse demand shocks explain Japan's experience; and nonlinear models are very useful in the analysis of the Japanese economy during the ZLB period.
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September 2020
Effect of Longevity on Saving Behavior: An Experimental Study on the Simple Intertemporal Life-Cycle Problem

Tetsuo Yamamori, Kazuyuki Iwata and Akira Ogawa
To examine how the length of retirement life affects people’s mistakes in choosing a saving plan, a laboratory experiment was conducted in which subjects face a simple life-cycle consumption/saving problem without interest rate, price and income volatilities, and any uncertainty. Lifetime is divided into working periods with a certain and constant amount of income and retirement periods with no income. We compared three treatment groups: the retirement periods are the last 5 periods out of 25 life periods (SR), these are the last 16 periods out of 36 life periods (LL), and these are the last 16 periods out of 25 life periods (SW). In all treatments, the subject’s lifetime income was the same. Our main findings are twofold. First, the magnitude of misconsumption (i.e., the deviation from conditional optimal consumption) is significantly positive for each treatment. Thus, people cannot find an optimal saving plan even in our simple life-cycle problem. Second, the subjects overreacted to both the long life and large income, which caused over-saving behavior in LL and under-saving behavior in SW, whereas there is no particular trend for mistakes in SR.
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August 2020
Economic consequences of follow-up disasters: lessons from the 2011 Great East Japan Earthquake

Anastasios Evgenidis, Masashige Hamano and Wessel N. Vermeulen
We apply a Bayesian Panel VAR (BPVAR) and DSGE approach to study the regional effects of the 2011 Great East Japan Earthquake. We disentangle the persistent fall in electricity supply following the Fukushima accident, from the immediate but more temporary production shock attributable to the natural disaster. Specifically, we estimate the contribution of the electricity fall on the regions’ economic recovery. First, we estimate a BPVAR with regional-level data on industrial production, prices, and trade, to obtain impulse responses of the natural disaster shock. We find that all regions experienced a strong and persistent decline in trade, and long-lasting disruptions on production. Inflationary pressures were strong but short-lived. Second, we present a DSGE model that can capture key observations from this empirical model, and provide theoretical impulse response functions that distinguish the immediate earthquake shock from the persistent electricity supply shock. Thirdly, in line with the predictions from the theoretical model, counterfactual analysis via conditional forecasts based on our BPVAR reveals that the Japanese regional economies, particularly the hit regions, did experience a loss in production and trade due to the persistent fall in electricity supply.
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July 2020
Attributes needed for Japan’s central bank digital currency

Hiroshi FUJIKI
The issuance of central bank digital currency became a real policy issue after the announcement of Facebook's Libra. Which types of product attributes should a central bank digital currency have to be widely accepted? We answer this question by analyzing the consumers' acceptance of hypothetical payment instruments. We used Japanese data from the 2019 Financial Literacy Survey to estimate a model of consumers' ranking of the frequency of the use of five payment instruments. The estimates of the model showed that the respondents to the survey value payment instruments with shorter transaction times and mobile payment instruments. Based on the estimates of the model, we conducted counterfactual simulations for the introduction of the hypothetical mobile version of noncash payment methods that required a shorter transaction time. We found that these hypothetical products would be the most frequently used payment methods on average; however, respondents with old, low-income, and low-financial asset holdings, who were likely to be heavy cash users, would use them less frequently. The results suggest that if the Bank of Japan wanted to issue a central bank digital currency that would be used almost every day as a replacement for cash, policy tools should be utilized to encourage the use of it by these groups as well.

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July 2020
Who Adopts Crypto Assets in Japan? Evidence from the 2019 Financial Literacy Survey

Hiroshi FUJIKI
The adoption of crypto assets has been of great concern to policymakers ever since Facebook announced its proposed cryptocurrency, Libra, in mid-2019. Behind this concern lies the possibility of widespread Libra adoption for day-to-day transactions, bringing with it a set of serious risks related to money laundering, illicit financing, and consumer and investor protection. This study aims to investigate the demographic characteristics, financial literacy, financial behavior, three risky asset holdings, and the use of noncash payment methods among Japanese crypto asset adopters. To achieve these aims, probit models and multinomial logit models are applied. We find that Japanese crypto asset owners are more likely to be young and male and to have lower educational levels than non-owners. This is consistent with previous studies. The average relationship between crypto asset ownership and level of objective financial literacy is not found to be statistically significant; however, crypto asset owners' degree of understanding of crypto assets is associated with their level of objective financial literacy. Owners who indicate that they understand crypto assets to some extent tend to have better objective financial literacy, while owners who indicate that they do not understand crypto assets tend to have a lower level of objective financial literacy. A better understanding of crypto assets is also positively associated with earning profits from investing in them; however, objective financial literacy is not related to profiting from investment in crypto assets. Our results suggest that, in predicting the performance of an investment in crypto assets, specific knowledge of crypto assets is more important than objective financial literacy that captures general financial knowledge. Other notable findings of the study include the fact that crypto asset owners obtain information about economy and finance from mass media more frequently; that they are more experienced with financial troubles, such as bank transfer fraud or multiple debts; and that they are less credit card literate than non-owners, on average. They tend also to be more myopic, subject to herding, lacking in self-control, over-confident in their financial literacy, and less loss-averse than non-owners. Crypto asset owners' demographic characteristics are similar to those of the individuals who have experience investing in stocks, investment trusts, and foreign currency denominated money market funds. They are also demographically similar to those who use both crypto assets and one of the four payment methods—credit cards, electronic money, debit cards, and mobile payments via smartphones—rather than crypto assets alone.
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July 2020
Welfare analysis of bank merger with financial instability

Akio Ino and Yusuke Matsuki
In this paper, we analyze the effect of a merger between banks by extending a structural model of banking industry with possibility of bank runs developed by Egan et al. (2017). This allows us to evaluate a merger in the banking sector, taking into account the effect on not only the merged bank itself, but also the stability of the entire financial system. We use our framework to analyse if the merger between Wells Fargo and Wachovia was beneficial to the social welfare. When the model is calibrated to the data in 2008, the merger increases the market share of the merged bank and thus allows it to set higher markup, which implies lower deposit interest rates. Through competition, this lowers the default probability of other banks in normal times. When crisis occurs to banks other than the merged bank, the default probability increases as the merged bank responds to crisis sharply. On the other hand, when the bank run occurs at the merged bank, the default probability is lower because it has higher profits. The merger increases the social welfare in normal times and when a bank run occurs at the merged bank, and decreases the social welfare when a bank run occurs at the other banks.
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June 2020
Debt intolerance: Threshold level and composition

Hideaki Matsuoka
Fiscal vulnerabilities depend on both the level and composition of government debt. This study examines the role of debt thresholds and debt composition in driving the non-linear behavior of long-term interest rates through a novel approach, a panel smooth transition regression with a general logistic model. The main findings are threefold. First, the impact of the expected public debt level on interest rates rises exponentially when the share of foreign private holdings exceeds approximately 20 percent of government debt denominated in local currency. Second, if the public debt level exceeds a certain level, an increase in foreign private holding of government debt could raise in interest rates, offsetting the downward pressure from higher market liquidity. Third, out-of-sample forecasts of this novel non-linear model are more accurate than those of previous methods.
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May 2020
Basic Employment Protection, Bargaining Power, and Economic Outcomes

Stijn Claessens and Kenichi Ueda
We propose a simple theory suggesting that basic employment protection can improve economy-wide welfare as it mitigates a time inconsistency problem that makes a firm’s promise to workers less credible. By tilting the bargaining power in renegotiations on contract terms towards workers, basic employment protection can incentivize workers to invest in firm-specific human capital and allow firms to keep operating. This contrasts to the case of rigid labor protection, which forces firms to go bankrupt too often with economic costs. We test for the effects using a quasi-natural experiment: US workers gained basic protections between the early-1970s and the mid-1990s, but in years varying by state. We find employment protection to benefit the growth of knowledge-intensive industries. We corroborate another prediction that stronger bargaining powers of workers vis-à-vis other stakeholders since contemporaneous bank branch deregulations (i.e., reduction in banks’ monopoly powers) also benefit knowledge-intensive industries. Although labor and financial reforms are rarely jointly investigated, we confirm that the direct positive effect of basic employment protection prevails when correcting for (changes in) creditors’ powers and vice versa. Since the findings do not maintain for R&D-intensive industries, we interpret the firm-specific human capital in our theory broadly, e.g., as for white-collar jobs.
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January 2020
Can the optimal tariff be zero for a growing large country?

Takumi Naito
Can the optimal tariff be zero for a growing large country? To pursue the possibility, we extend the Rivera-Batiz--Romer lab-equipment model of endogenous technological change to include asymmetric countries, import tariffs, and either homogeneous or heterogeneous firms. Each country's domestic revenue share is a sufficient statistic for its long-run growth rate, but it is not for its long-run welfare. A unilateral tariff reduction by either country always increases the balanced growth rate. A zero tariff is locally optimal for a country under a mild condition, which is automatically satisfied at a symmetric balanced growth path with the zero tariff.
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January 2020
Optimality in an OLG model with nonsmooth preferences

Eisei Ohtaki
It is a well-known observation that, in the overlapping generations (OLG) model with the complete market, we can judge optimality of an equilibrium allocation by examining the associated equilibrium price. Motivated by recent remarkable development in decision theory under ambiguity, this study reexamines the above observation in a stochastic OLG model with convex but not necessarily smooth preferences. It is shown that, under such preferences, optimality of an equilibrium allocation depends on the set of possible supporting prices, not necessarily on the associated equilibrium price itself. Therefore, observations of an equilibrium price do not necessarily tell us precise information on optimality of the equilibrium allocation.
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January 2020
The Formation of Inflation Expectations: Micro-data Evidence from Japan

Junichi Kikuchi and Yoshiyuki Nakazono
Using a unique survey of 50,000 households for 4 years, this study examines how households form inflation expectations. There are three findings. First, disagreements on inflation forecasts among households are larger for the shorter-term than those for the longer-term horizon; additionally, disagreements are predicted by how frequently households collect information about overall inflation rates. Inflation forecasts for the 1-year horizon are widely dispersed, while those for the 10-year horizon are anchored below 2%. Second, households heterogeneously update their information sets on prices. 46% of the households collect information about the consumer price index at least once a quarter, while the remaining households less frequently or never obtain this information. Third, forecast revisions are sensitive to a change in food prices. We show that more than half of households are attentive only to a change in food prices and may form their inflation expectations using food price changes as a signal of fluctuations in the overall inflation rates. The existence of numerous households that are inattentive to the nationwide inflation rates casts doubt on the transmission mechanism of the monetary policy through the management of expectations.
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December 2019
Decomposing Local Fiscal Multipliers: Evidence from Japan

Taisuke Kameda, Ryoichi Namba and Takayuki Tsuruga
Recent studies on fiscal policy use cross-sectional data and estimate local fiscal multipliers along with spillovers. This paper estimates local fiscal multipliers with spillovers using Japanese prefectural data comparable with the national accounts. We estimate the local fiscal multiplier on output to be 1.7 at the regional level. The regional fiscal multiplier consists of the prefecture-specific components and a component common across prefectures within the same region, which we interpret as the region-wide effect. Converting the latter component into the spillover, we find that the spillover is positive and small in size. We decompose the regional fiscal multiplier on output into multipliers on expenditure components. The regional fiscal multiplier on absorption exceeds 2.0 because of the crowding-in effect on consumption and investment. Moreover, we find that the spillover to absorption is considerable in contrast to the spillover to output.
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October 2019
Search-for-Yield under Prolonged Monetary Easing and Aging

Yoshiaki Ogura
We find several facts that suggest the Japanese regional loan market conforms to the "search-for-yield" phenomenon, in which banks are driven to provide more risky loans by diminished loan spreads. We use a structural model to estimate demand elasticity and the degree of competition in local loan markets simultaneously. Our estimates show that competition intensifies in markets where banks hold more slack liquidity caused by monetary easing, and where loan demand is less elastic against lowering interest rates due to a rapidly aging population. We find reasonably robust evidence that banks in such competitive markets are driven to extend riskier loans.
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October 2019
Output and Welfare Implications of Oligopolistic Third-Degree Price Discrimination

Takanori Adachi and Michal Fabinger
Using estimable concepts, this paper provides sufficient conditions for third-degree price discrimination to raise or lower aggregate output, social welfare, and consumer surplus under differentiated oligopoly when all discriminatory markets are open even without price discrimination. Specifically, we permit general demand functions and cost differences across separate markets, and show that our sufficient conditions entail a cross-market comparison of multiplications of two or three of the following key endogenous variables with economic interpretation:pass-through value,market power index, and markup value. Notably, our results based on these “sufficient statistics” can readily be extended to allow heterogeneous firms, suggesting that they would be used as a building block for empirical study of third-degree price discrimination and welfare.
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October 2019
Capacity choice in an international mixed triopoly

Kazuhiro Ohnishi
This paper considers a mixed triopoly model where a state-owned firm, a domestic labor-managed firm and a foreign capitalist firm are allowed to pre-install capacity as a strategic commitment device. First, each firm simultaneously and independently chooses its capacity level. None of the firms can reduce or dispose of capacity. Second, each firm simultaneously and independently chooses its output level. The paper shows that there is an equilibrium solution where only the domestic labor-managed firm pre-installs excess capacity as a strategic commitment device.
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October 2019
Toward Rebuilding of Modern Macroeconomic Theory: Market Failure in a Macro Economy and Keynes’s Unemployment Equilibrium

Eizo Kawai
The present study aims to perceive an unacceptable unreality of a macro price mechanism: that is, the unreality that under any severe recession, deterioration of deflation or a consistent decrease in the rate of inflation will lead an economy to full employment equilibrium. This unreality results from an arbitrary assumption that the micro price mechanism operates even in a macro economy. This study challenges the existing modern macroeconomics theories on price mechanism and unemployment based on the skepticism toward existing theories based on the observations of a real economy.

The study reveals two main results. First, market failure in a macro economy, that is, the price mechanism is significantly incomplete and does not function, in particular, under deflation. This differs significantly from “the market failure due to the inflexibility of wages and prices, asymmetry of information, and so on,” as stated by new Keynesianism. The key reason for market failure in a short-run macro economy is the unavoidable spillover effects, or derived demand effects between goods and labor markets under disequilibrium due to inflexible wages and prices. Macro price mechanism completely overlooks these effects because of the arbitrary assumption, thus leading to the unrealistic price mechanism stated earlier. Considering the spillover effects, or derived demand effects under disequilibrium, the assumption of full employment equilibrium, along with the assumption of flexible wages and prices, does not hold. Although these effects are the results of the short-run analysis, there would be market failure in a macro economy even in the long run as an inevitable conjecture.

To rebuild dynamic stochastic general equilibrium (DSGE) models, it is important to study the aforementioned fundamental and theoretical problem that macro price mechanism does not function. A static model is enough to explain the mechanism and dynamic models appear unnecessary and unfeasible.

Second, Keynes’s unemployment equilibrium is realized owing to market failure in a macro economy. Market failure in a macro economy shows that involuntary unemployment results from quantitative and not price aspects. In other words, involuntary unemployment is not a result of the rigidity of real wages but of a shortage in labor demand under rigid real wages. This is possible by reinterpreting the Shapiro–Stiglitz efficiency wage model. Finally, demand is a critical factor in both the short run and the long run.

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August 2019
Efficiency investment and curtailment action: complements or substitutes

Shigeru Matsumoto and Hajime Sugeta
Households. energy-saving activities are often categorized into efficiency investment and curtailment action. Although households use these two activities simultaneously, previous studies have analyzed these two activities separately. In this study, we develop an energy-saving model based on a household production framework to show how these two activities are related. We assume that a household allocates time among market work, leisure, and curtailment action. We further assume that the household spends income on purchasing market goods, energy efficiency investment, and energy service. The household receives utility from entertainment activity and energy service but both market goods and leisure time are necessary for entertainment activity. If the household spends time on curtailment action, then leisure time form entertainment activity will be reduced. In contrast, if the household spend money for efficiency investment, then market goods available for entertainment activity will be reduced. With this household production framework, we show that a household can use energy efficiency investment and curtailment action jointly; namely, a household who invest heavily in energy efficiency will spend more time on curtailment action. In the empirical section, we use microlevel data from the Survey on Carbon Dioxide Emission from Households (SCDEH) to examine the validity of this prediction in a real world setting. SCDDH contains a wide variety of information related to household’s energy usage, and both curtailment actions of households and vintage of appliances that households own were surveyed. Using this information, we examine whether the intensity of curtailment action varies between households owning new and old appliances. We show that households using an old television (TV) turn o¤ the main switch of TV more frequently but those using a new refrigerator (REF) adjust the temperature according to the season and avoid overstuffing to maintain cooling efficiency. Furthermore, we show that households installing light emitting diode (LED) lamps control brightness of rooms and those using a new air conditioner (AC) set room temperature higher. Therefore, we observe that respondents jointly use efficiency investment and curtailment action, except in the case of a TV switch-off. This result predicts that the promotion of energy saving products will not hinder the households’ voluntary energy saving practice.
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August 2019
GVC journeys: Industrialisation and Deindustrialisation in the Age of the Second Unbundling

Richard Baldwin and Toshihiro Okubo
Offshoring and participation in Global Value Chains (GVCs) are critical to understanding the rapid deindustrialisation of G7 nations and the rapid industrialisation of a handful of developing nations. This paper distinguishes between trade in final goods and trade in parts to track the shifting pattern of the location of manufacturing. We introduce a simple empirical measure of comparative advantage in parts on one hand and in final goods on the other. We illustrate how this distinction can help organise thinking on the patterns of industrialisation and deindustrialisation—namely the“GVC journeys” of advanced and emerging economies. We also provide one simple model. The model highlights the interactions of trade costs and the knowledge transfers to accompany offshoring of parts production and assembly, which we call trade-led versus knowledge-led globalisation.
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May 2019
How do we choose to pay using evolving retail payment technologies? Some additional results from Japan

Hiroshi FUJIKI
Using Japanese individual household datasets, we obtain the following results that are consistent with findings in most advanced economies. For our first set of findings, persons using electronic money (contactless prepaid cards available in Japan after 2001) for day-to-day transaction values of less than 5,000 yen have lower cash holdings than cash users. Second, the average cash holdings of credit card users for both day-to-day and regular payments are less than that of cash users for day-to-day payments not using credit cards for regular payments. Our second set of findings contributes to the related literature in at least two respects. First, we combine the choice of payment methods for both day-to-day and regular payments. Second, we pay due attention to institutional details about the use of credit cards in Japan and propose unique identifying assumptions excluding those persons using credit cards for day-to-day transactions but not regular payments, and those using cash for day-to-day transactions but credit cards for regular payments.
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May 2019
Endogenous Social Preferences in Bargaining and Contract Enforcement

Tetsuo Yamamori and Kazuyuki Iwata
In this study, we explore the impact of the endogenous nature of social preferences in bargaining on contract enforcement. For this purpose, we conduct laboratory experiments based on a one-shot gift exchange game in the context of firm–worker relationships. Our design admits two types of worker proposals on the contracts to his/her firm, defined as cheap talk. One contains only the desirable wage of the worker, while the other additionally contains his/her future effort. We find that worker preferences become biased in a more self-serving direction by making proposals in bargaining. That is, both types of worker cheap talk undermine reciprocity, thus deteriorating efficiency in an incomplete contract. Additional experiments show that the negative effect of cheap talk in bargaining is robust even for repeated interactions. By contrast, worker proposals including future efforts lead to successful coordination, which outweigh the negative effect on reciprocal behaviors.
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May 2019
(A)symmetric Information Bubbles: Experimental Evidence

Yasushi Asako, Yukihiko Funaki, Kozo Ueda and Nobuyuki Uto
Asymmetric information has explained the existence of a bubble in extant theoretical models. This study experimentally analyzes traders' choices, with and without asymmetric information, based on the riding-bubble model. We show that traders tend to hold a bubble asset for longer, thereby expanding the bubble in a market with symmetric, rather than asymmetric, information. However, when traders are more experienced, the size of the bubble decreases, in which case, bubbles do not arise with symmetric information. In contrast, the size of the bubble is stable in a market with asymmetric information.
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April 2019
Efficiency and stability in sender-receiver games under the selection-mutation dynamics

Seigo Uchida
Our study aims to reveal the relationship between the efficiency of neutrally stable strategies and asymptotic stability of rest points close to those strategies in Lewis-type sender-receiver games under the selection-mutation dynamics. We focus on the game in which the number of states is not equal to that of signals. While no strict Nash strategy exists in our case, we show that there are some neutrally stable strategies that have rest points close to these strategies, and that these rest points can be asymptotically stable under the selection-mutation dynamics. Moreover, those neutrally stable strategies give agents the maximal payoff. We name those neutrally stable strategies the extended signaling system, the unilaterally mixed strategy, and the max hybrid strategy.
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March 2019
Cash Usage Trends in Japan: Evidence Using Aggregate and Household Survey Data

Hiroshi FUJIKI and Kiyotaka Nakashima
We examine the trends in cash usage in Japan and its substitution with noncash payment methods, such as credit cards and electronic money, using both aggregate and individual household survey data. We find that cash hoarding accounts for as much as 42% of total cash circulation in Japan. Behind this finding lies an unstable semi-log cash demand function after the late 1990s and a stable log-log cash demand function from 1995 to 2016. We also find that the extent of possible decreases in cash demand because of the substitution of cash for credit cards in day-to-day transactions is not large. Our back-of-the-envelope estimate of the possible maximum decrease in cash demand for day-to-day transactions is at most 0.4% in 2017 of the total cash in circulation in Japan.
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February 2019
Public good provision financed by nonlinear income tax under reduction of envy

Takuya Obara and Shuichi Tsugawa
We examine optimal taxation and public good provision by a government that considers reduction of envy as a constraint. We adopt the extended envy-freeness proposed by Diamantaras and Thomson (1990), called λ-equitability. We derive the modified Samuelson rule under an optimal nonlinear income tax and show, using a constant elasticity of substitution utility function, that the direction of distorting the original Samuelson rule to relax the λ envy-free constraint is crucially determined by the elasticity of substitution. Furthermore, we numerically show that the optimal level of provision increases (decreases) in the degree of envy-freeness when the original Samuelson rule is upwardly (downwardly) distorted.
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January 2019
The Natural Rate of Interest in a Nonlinear DSGE Model

Yasuo Hirose and Takeki Sunakawa
This paper investigates how and to what extent nonlinearities, including the zero lower bound on the nominal interest rate, affect the estimate of the natural rate of interest in a dynamic stochastic general equilibrium model with sticky prices and wages. The estimated natural rate of interest in a nonlinear model is substantially different from that in its linear counterpart because of a contractionary effect of the zero lower bound. Price and wage dispersion, from which a linear model abstracts, play a minor role in identifying the natural rate.
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January 2019
The Effects of Lender of Last Resort on Financial Intermediation during the Great Depression in Japan

Masami Imai, Tetsuji Okazaki and Michiru Sawada
The interwar Japanese economy was unsettled by chronic banking instability, and yet the Bank of Japan (BOJ) restricted access to its liquidity provision to a select group of banks, i.e. BOJ correspondent banks, rather than making its loans widely available “to merchants, to minor bankers, to this man and to that man” as prescribed by Bagehot (1873). This historical episode provides us with a quasi-experimental setting to study the impact of Lender of Last Resort (LOLR) policies on financial intermediation. We find that the growth rate of deposits and loans was notably faster for BOJ correspondent banks than the other banks during the bank panic phase of the Great Depression from 1931-1932, whereas it was not faster before the bank panic phase. Furthermore, BOJ correspondent banks were less likely to be closed during the bank panics. To address possible selection bias, we also instrument a bank’s corresponding relationship with the BOJ with its geographical proximity to the nearest branch or the headquarters of the BOJ, which was a major determinant of a bank’s transaction relationship with the BOJ at the time. This instrumental variable specification yields qualitatively same results. Taken together, Japan’s historical experience suggests that central banks’ liquidity provisions play an important backstop role in supporting the essential financial intermediation services in time of financial stringency.
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May 2018
Japan’s Unconventional Monetary Policy and Income Distribution: Revisited

Ayako Saiki and Jon Frost
This is a revaluation of our study which we published in 2014 (Saiki and Frost, 2014) The study found that Japan’s unconventional monetary policy (UMP) had widened income inequality in Japan. Since then, the Bank of Japan (BOJ) has further increased the monetary base and inflation has been low (headline inflation is about 1% as of this writing) but positive. We revisit the relationship between Japan’s quantitative and qualitative easing (QQE) and find further evidence for our conjecture. The impact of UMP on income distribution may differ in Japan and other countries for various reasons, including differences in household balance sheets and the flexibility of labor markets.
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March 2018
Intermediary Organizations in Labor Markets

Takayuki Oishi, Jun Tomioka and Shin Sakaue
We propose a job matching model of intermediary labor markets by developing the seminal work of Kelso and Crawford (1982, Econometrica 50:1483-1504). Using this model, we show that for an arbitrary fixed broker-fee rate, the salary-adjustment process converges to a core allocation in intermediary labor markets where high-skilled workers are matched to high-technology firms by the private middleman and low-skilled workers are matched to low-technology firms by the public middleman. This result means that the dual labor market is emerged as a stable outcome of job-matching promoted by the private and public middlemen. Finally, we discuss empirical relevance of our theoretical model by using the data of job placement services in Japan.
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March 2018
Human capital accumulation through recurrent education

Mariko Tanaka
Sustaining economic growth under rapid aging is one of the most important policy issues in Japan. Because of the difficulty of increasing labor force in an aging society, it is desirable to promote human capital accumulation for improvement of labor quality in the long run. However, since human capital accumulated in the young may become obsolete for elder workers, we cannot achieve sufficient level of human capital to sustain economic growth only through education for the young. Thus, we need recurrent education for the elderly or retired female workers in an aging society as in Japan. Hence, this paper investigates whether we can achieve socially optimal level of human capital when the decision to participate in recurrent education is left to the private sector.
To answer this question, this paper studies human capital accumulation through recurrent education as well as primary education and tertiary education in an OLG model. We show that the effects of mortality on recurrent education depends on the relationship between tertiary education and recurrent education. In other words, if they are complements, i.e. if a higher level of tertiary education increases the effects of recurrent education, a decline in mortality rate promotes recurrent education, which improves human capital. On the other hand, if they are substitutes, i.e. if a a higher level of tertiary education decreases the effects of recurrent education, a decline in mortality rate decreases the level of recurrent education, which decreases human capital. In the latter case, we cannot achieve sufficient level of recurrent education to sustain economic growth in an aging society through voluntary choice by the private sector, and hence, we need policies to promote recurrent education.
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March 2018
Re-examination of Modern Macroeconomics: Market Failure in a Walrasian Economy and Keynes's Unemployment Equilibrium

Eizo Kawai
This study reexamines the skepticism toward the prevailing theories of modern macroeconomics based on the observations of a real economy. Two main hypotheses are tested.

First, the price mechanism is significantly incomplete in a Walrasian economy and does not function, particularly under deflation, which leads to market failure in such an economy. This completely differs from “the market failure due to the rigidity of wages and prices, menu cost and asymmetry of information, and so on” as stated by new Keynesianism. The crucial cause of market failure in the Walrasian economy is the unavoidable spillover effects between goods and labor markets under disequilibrium. Walrasian price mechanism completely disregards these effects. Considering these effects, the belief of the Walrasian general equilibrium, along with the assumption of flexible wages and prices, does not hold. The scale of real balance effects is the most critical factor in the study results. A static model suffices for these explications. Dynamic stochastic general equilibrium models are unnecessary and unfeasible.

Second, Keynes’s unemployment equilibrium is realized due to market failure in the Walrasian economy. Therefore, involuntary unemployment is a result of quantitative aspects and not price aspects. In other words, involuntary unemployment is not caused by the rigidity of real wages but by a shortage of labor demand under rigid real wages. This is possible by re-interpreting the Shapiro–Stiglitz efficiency wage model. Finally, demand is a critical factor in both the short run and long run.

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March 2018
Estimating a Nonlinear New Keynesian Model with a Zero Lower Bound for Japan

Hirokuni Iiboshi, Mototsugu Shintani and Kozo Ueda
We estimate a small-scale macroeconomic model for Japan by taking into account the nonlinearity stemming from the zero lower bound (ZLB) of the nominal interest rate. To this end, we apply the Sequential Monte Carlo Squared method to the case of Japan, where the ZLB has constrained the country's monetary policy for a considerably long period. Employing a nonlinear estimation is crucial to deriving implications for monetary policy. For example, the Bayesian model selection suggests that past experience of recessions reducing the nominal interest rate to zero is carried over to today's monetary policy. However, a nonlinear estimation has little effect on the estimate of the natural rate of interest, which has often been negative since the mid-1990s.
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February 2018
Long-term interest rates and bank loan supply: Evidence from firm-bank loan-level data

Arito Ono, Kosuke Aoki, Shinichi Nishioka, Kohei Shintani and Yosuke Yasui
Based on a mean-variance model of bank portfolio selection subject to the value-at-risk constraint, we make predictions on transmission channels through which lower long-term interest rates increase bank loan supply: the portfolio balance channel, the bank balance sheet channel, and the risk-taking channel. Using a firm-bank loan-level panel dataset for Japan, we find evidence of the presence of these channels. First, an unanticipated reduction in long-term rates increased bank loan supply. Second, banks that enjoyed larger capital gains on their bond holdings increased loan supply. Further, this effect was stronger for loans to smaller, more leveraged, and less creditworthy firms.
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January 2018
How is internal radiation exposure risk evaluated at the markets? Perceived quality degradation of Fukushima peach

Shigeru Matsumoto and Viet Ngu Hoang
The Great Tohoku Earthquake and massive tsunami disabled the Fukushima Daiichi power plant cooling system, which resulted in a meltdown of the reactor core and hydrogen explosion of the reactor buildings. A large amount of radioactive substances was released into the environment and the agricultural production in surrounding area was severely damaged by the radioactive contamination. Many experimental studies have been conducted after the nuclear accident to understand how consumers evaluate the internal radiation exposure risk associated with the consumption of agricultural food produced in the affected region. The studies have reported that a typical consumer differentiates agricultural foods produced at the contaminated region from those produced at non-contaminated region and then spends non-negligible amounts of money to lower their perceived internal radiation exposure risk. However, only a few studies have examined how internal radiation exposure risk is evaluated at the market level. In this study, we analyze the sales data of Japanese wholesale markets to examine how consumers’ valuation about agricultural food has been altered by the nuclear accident. By modifying the Dixit–Stiglitz demand model, we propose an empirical model to quantify the change in consumer’s valuation between competitive agricultural products. We then apply the proposed model for the analysis of daily peach sales data obtained from Japanese wholesale markets. Our empirical results demonstrate that consumer valuation of Fukushima peach dropped significantly in the nuclear accident year, but it rapidly recovered in the following year. The result suggests that the measures against radioactive contamination are positively evaluated among Japanese consumers.
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January 2018
Strategy-Proofness and Efficiency of Probabilistic Mechanisms for Excludable Public Good

Kazuhiko Hashimoto and Kohei Shiozawa
We study strategy-proof probabilistic mechanisms in a binary excludable public good model. We construct a new class of probabilistic mechanisms satisfying strategy-proofness, called α-mechanisms.
We first show that the α-mechanisms are second-best efficient. Next, we identify the optimal α-mechanism with respect to the supremal welfare loss, and show that it improves the inefficiency of the equal cost sharing with maximal participation mechanism [Moulin (1994)] and the anonymous augmented serial mechanisms [Ohseto (2005)].
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December 2017
Public good provision financed by nonlinear income tax under reduction of envy

Shuichi Tsugawa and Takuya Obara
We examine optimal taxation and public good provision by a government which takes reduction of envy into consideration as one of the constraints. We adopt the notion of extended envy-freeness proposed by Diamantaras and Thomson (1990), called λ-equitability. We derive the modified Samuelson rule at an optimum income tax, and show that, using a constant elasticity of substitution utility function, the direction of distorting the original Samuelson rule to relax λ envy free constraints is crucially determined by the elasticity of substitution. Furthermore, we numerically show that the level of public good increases (or decreases) in the degree of envy-freeness when the provision level is upwardly (or downwardly) distorted.
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October 2017
Strategy-proof multi-object allocation: Ex-post revenue maximization with no wastage

Tomoya Kazumura, Debasis Mishra and Shigehiro Serizawa
A seller is selling multiple objects to a set of agents. Each agent can buy at most one object and his utility over consumption bundles (i.e., (object,transfer) pairs) need not be quasilinear. The seller considers the following desiderata for her (allocation) rule, which she terms desirable: (1) strategy-proofness, (2) ex-post individual rationality, (3) equal treatment of equals, (4) no wastage (every object is allocated to some agent). The minimum Walrasian equilibrium price (MWEP) rule is desirable. We show that at each preference profile, the MWEP rule generates more revenue for the seller than any desirable rule satisfying no subsidy. Our result works for quasilinear domain, where the MWEP rule is the VCG rule, and for various non-quasilinear domains, some of which incorporate positive income effect of agents. We can relax no subsidy to no bankruptcy in our result for certain domains with positive income effect.
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October 2017
The dynamical stability for an evolutionary language game under selection-mutation dynamics

Seigo Uchida and Masakazu Fukuzumi
We present complete results pertaining to the dynamical stability for sender-receiver games following Lewis (1969), and Nowak and Krakauer (1999) under the selection-mutation dynamics.
Our research reveals that two distinct classes of neutrally stable strategies have a distinguishing feature of the dynamic stability.
The rest points close to the strategies of these classes are asymptotically stable and all rest points other than these are not.
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April 2017
Technology Polarization

Koki Oikawa and Minoru Kitahara
We construct a new method to describe firm distributions within technology fields and investigate the relationship between those distributions and aggregate innovation. To locate firms on a technology space, we apply multidimensional scaling for the inter-firm technological dissimilarity matrices that are computed from patent citation overlaps among firms using the NBER US patent dataset. Our estimated firm distributions show increasing trends in technological distance and polarization on average, where we follow Duclos, Esteban and Ray (2004) to measure polarization. We construct a model of inter-group competition in which polarization stimulates aggregate R&D. The model fits data before 1990 but the impact of polarization is reversed after that. We attribute the structural change to the major patent reform in the United States in 1980s.
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April 2017
The Effect of the Great East Japan Earthquake on the Evacuees’ Unemployment and Earnings

Izumi Yamasaki, Rubkwan Thurmanpornphilas, Miho Takizawa and Tomohiko Inui
This study analyzes the impact of evacuation status on labor market outcomes such as employment and earnings following the Great East Japan Earthquake by using annual microdata from the 2012 Employment Status Survey in Japan. This is the first research that comprehensively examines the effect of evacuation status on labor market performance for evacuees of the Great East Japan Earthquake. The evacuation status categories are (1) evacuated and still away from home, (2) evacuated and moved to another place, (3) evacuated and already returned home, and (4) did not evacuate. We applied a probit model to estimate unemployment and an ordinary least squares regression to estimate earnings. To estimate unemployment and earnings, we also used propensity score matching to control for selection into evacuation status on observable characteristics. After controlling for selection into evacuation categories on observable characteristics, our findings show that those still away from home and those who moved tend to have the worst labor market performance in terms of probability of unemployment and annual earnings. The estimates suggest that we need a specific employment support for those who evacuated especially for those who are still away from home and those who moved to another place.
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March 2017
Inter-firm Technological Proximity and Knowledge Spillovers

Koki Oikawa
This paper has two objectives. One is to survey previous studies concerning indicators of technological proximity and distance to identify technological relationships between firms, particularly in terms of spillovers of technology and knowledge. The other objective is to reexamine the spillover effect in research and development by combining the traditional technological proximity with a measurement of within-field technological relationships, which is based on patent citation overlaps. I find that the average technological proximity is increasing over these three decades in the United States and within-field technological proximity shows sizable variations, and that the spillover effect is underestimated unless the changes in within- field proximities are taken into account.
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March 2017
The Effects of Ethnic Chinese Minority on Vietnam’s Regional Economic Development in the Post-Vietnam War Period

Masami Imai and Tuan Anh Viet Nguyen
This paper examines the impact of the Hoa, an ethnically Chinese, economically dominant minority, on regional economic development in Vietnam. To address the endogeneity of the geographical distribution of the Hoa, we use an important historical episode: the rapid deterioration in Sino-Vietnamese diplomatic relationship that led many ethnic Chinese to flee abroad, particularly to the refugee camps in the Guangxi province of China, in 1979. We find that the effects of proximity to the refugee camps on the share of ethnic Chinese in 1989 were more pronounced for provinces that had a larger presence of the ethnic Chinese population in 1979. We also find strong correlations between the 1989 share of ethnic Chinese (instrumented) and contemporary indicators of economic performance. The results suggest that the ethnic Chinese minority had positive economic impacts on Vietnam’s regional economies and that the post-Vietnam War exodus of ethnic Chinese was likely to have had long-term negative economic impacts.
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September 2016
A Distribution-Free Test of Monotonicity with an Application to Auctions

Yusuke Matsuki
Abstract This study develops a simple distribution-free test of monotonicity of conditional expectations. The test is based solely on ordinary least squares (OLS) and exploits the property between conditional expectation and projection; we prove that the monotonicity of a conditional expectation function restricts the sign of a corresponding projection coefficient. The estimated projection coefficient is used for a one-tailed t-test. The test -- which is notably simpler than other monotonicity tests -- is applied to bidding data from Japanese construction procurement auctions to empirically test first-price sealed bid auction models with independent private values (IPV), assuming the data are generated from a symmetric Bayesian Nash equilibrium. We regress the bid level on the number of bidders and use the estimated projection coefficient for testing. We find that the test results depend on public work categories.
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July 2016
Is the Renminbi a Safe Haven?

Rasmus Fatum, Yohei Yamamoto and Guozhong Zhu
We investigate the relationship between market uncertainty and the relative value of the Renminbi against currencies that the safe haven literature typically considers as the traditional safe haven currency candidates. Our sample spans the February 2011 to April 2016 period. Band spectral regression models enable us to capture that the relationship between market uncertainty and the relative value of the Renminbi is frequency dependent. While we find evidence of some degree of safe haven currency behavior of the Renminbi during the early part of our sample, our findings do not support the suggestion that the Renminbi is currently a safe haven currency or that the Renminbi is progressing towards safe haven currency status.
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May 2016
Does Managerial Experience in a Target Firm Matter for the Retention of Managers after M&As?

Kenjiro Hirata, Ayako Suzuki and Katsuya Takii
This paper examines how managers' tenures in target firms influence their probability of retention as board members after mergers or acquisitions in Japanese firms. It develops a model that distinguishes several hypotheses about the effect of tenure on separation. Our results suggest that experience as an employee increases firm-specific skills, but at the expense of the ability to learn new skills. However, experience as a board member does not have this effect in Japanese firms, the structure of which is known to encourage specific skills. Further, we provide a novel method to correct for selection biases when using data on managers.
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April 2016
Political Economy of Voluntary Approaches: A Lesson from Environmental Policies in Japan

Toshi H.Arimura, Shinji Kaneko, Shunsuke Managi, Takayoshi Shinkuma, Masashi Yamamoto and Yuichiro Yoshida
In this paper, we attempt to identify the reasons behind the differences in environmental policy between Japan and other developed countries, particularly the US. Japan’s environmental policy is unique in that voluntary approaches have been taken to reduce total emissions. This strategy is quite different from the traditional approach of heavy-handed regulation. In Japan, voluntary approaches are conducted through negotiations with polluters. The idea behind this type of voluntary approaches is that the government can induce polluters to abate emissions voluntarily by using light-handed regulations and the threat of heavy-handed regulations. The light-handed regulation is quite effective especially when it is costly to introduce heavy-handed regulations, although the negotiations are difficult to conduct when the number of stakeholders is large. To strengthen our analysis, we provide some examples of Japanese environmental policies which are successful and the ones that are not.
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April 2016
Determinants and Effects of Worker-Initiated Training: Learning about Required Job Skills at the Workplace

Hiromi Hara
There are two main channels for a worker to accumulate human capital; firm-provided training and worker-initiated training (jiko-keihatu). This study focuses on worker-initiated training---a learning activity to improve one's job skills outside of work hours at one's own expense---and examines the motivation underpinning it and its effects on wage growth, skill development, and job opportunities using a unique survey of Japanese workers. While the results indicate that there is no statistically significant immediate increase in wages from worker-initiated training, thus perhaps causing workers to be hesitant to engage in it, it is also shown that worker-initiated training improves job skills and enhances job opportunities, which suggests that it could lead to a wage increase in the future. In addition, those who receive guidance from their supervisors about required skills at the workplace, and thus some insight into desirable work-related skills, are more likely to engage in worker-initiated training than those who have not received such guidance. Moreover, those who within the past three years participated in firm-provided training, the other opportunity for a worker to learn about required skills at the workplace, are also more likely to participate in worker-initiated training. These results suggest that the introduction of a system to better inform workers about required job skills and the possible long-term effects of worker-initiated training could be effective in promoting it.
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January 2024
マイクロデータを用いた計量経済学的接近法 -ヘドニック法を用いた品質調整問題を題材として-

清水千弘, 新井優太
マイクロデータを用いた計量経済分析は、多様な大規模データの入手可能性が飛躍的に高まるとともに、大容量のデータを処理可能な計算機の普及、分析用プログラムの発達により、急速に進化してきている。しかし、マイクロデータが公開されていることは少ないため、データの希少性が研究の評価となることも依然として残っている。そのため、データ収集能力が研究推進力の大きな比重を占めることには変わりがない。また、実際にデータが取得できたとしても、データのノイズを取り除き、データを加工し、分析できるようになるまでには、高いデータ加工能力が要求される。また、モデルの推計においても、高度なプログラミング能力が要求される。本稿では、Diewert and Shimizu(2024)を題材として、一連の研究の中で行われた、a)データの整備・加工、b)推計手順、そして推計された結果のc)評価・検証などの具体的な手続きを公開し、汎用的なプログラム言語で再現し、網羅的に整理した。さらに、推計された結果の解釈を含む研究手法(Research method)、研究リソースを公開することで、今後のマイクロデータを用いた計量分析、特にヘドニック・モデルに関する研究を進める大学院生や、これから本分野の研究を始める研究者に対して、一定の指針を示す。
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January 2024
マクロデータを用いた計量経済学的接近法 -生産性測定を題材として-

清水千弘, 新井優太
マクロデータを用いた計量経済モデルは、様々な形で進化してきている。しかし、実際のモデル構築において分析者は、データの取得、加工、必要とされる変数の推計、作成などをしなければ、モデルの推計を行うことができない。そして、推計モデルを構築し、推計プログラムを作成し、モデルを推計していく。推計結果を評価した結果(validation)がふさわしくない場合には、データを見直し、モデルを再構築して、推計プログラムを修正して、モデル推計を再度行う。さらに、モデルが推計された後には、それを評価・議論をし、最終的に論文を書き上げていく。本稿では、Diewert, Nomura and Shimizu(2024)を題材として、一連の推計の中で利用された、データの整備、加工、推計手順などを整理し、汎用的なプログラム言語で再現し、網羅的に整理する。さらに、推計された結果の解釈やこのような広い意味での研究技術、研究リソースを公開していくことで、今後のマクロデータを用いた計量分析、特に生産性の測定に関する研究を進める大学院生や、これから本分野の研究を始める研究者に対して、一定の指針を示す。
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December 2023
研究開発拠点の集積が企業の製品ポートフォリオに及ぼす影響について:企業・事業所・品目レベルのデータによる実証分析

松浦 寿幸
本稿は、研究開発拠点の集積が企業パフォーマンス、とりわけ製品ポートフォリオの転換に及ぼす影響を明らかにするものである。企業の生産性向上には、近隣に立地する企業からの技術スピルオーバーが重要であるとされているが、そのメカニズムを明らかにするためにはミクロ的なデータにアプローチが不可欠である。本研究では、地域別に自社、および近隣の企業・研究機関の研究開発ストックを推計し、こうした指標から計測される研究開発拠点の集積が企業の製品ポートフォリオ、すなわち製品の追加・停止の意思決定に及ぼす影響について分析する。具体的には、工業統計と科学技術調査の調査票情報を企業レベルでリンクさせ、地域レベルの研究開発ストックを推計した。また、製品ポートフォリオについては工業統計の品目別出荷額で製品追加・停止を把握している。分析結果からは近隣に立地する民間企業、ならびに公的機関・大学等の研究開発ストックからのスピルオーバー効果に企業の生産品目が増加する効果が観察された。
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May 2023
日本の株式市場における高頻度取引について

山田 昌弘
本研究では日本取引所から提供された板再現データを用いて、日本の株式市場における高頻度取引の特性についての実証分析を行った。特に、個人投資家や国内証券会社による取引を統計的に識別したうえで、高頻度取引と比較する検証を試みた。近年、高頻度取引が売買代金と注文発注の大きな部分を占め価格発見への貢献が高まっている点や、日中取引による利益獲得能力がある点などは、既存の研究報告と同一の傾向がみられる。一方、日本市場では高頻度取引は流動性を消費するような取引を多く行っているという点は、海外での既存の報告とは異なる。また流動性供給者としては個人投資家の存在が重要であるものの、指値注文に機動性を欠き、切りの良い価格を選好するようなバイアスがあるなど、様々な状況で高頻度取引とは対照的な行動をしている、ということがわかった。
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December 2022
日本の銀行業の変貌:所得データに基づく分析

小野有人
本稿では、日本の銀行業の変貌を所得データに基づき考察し、今後を展望する。本稿の主な分析結果は以下である。第一に、銀行業所得のGDPに対する比率(銀行業シェア)は、1950年代半ばから1980年代後半にかけて上昇したが、1990年代以降は低下傾向にあり、成長性が乏しい。第二に、銀行業シェアの内訳をみると、預貸業務を中心とする資金利益が減少する一方、手数料とトレーディング損益が増加した。資金利益の減少は、預貸利ざやの低下が主因である。預金スプレッドは長期的に低下し、1980年代後半以降はマイナスないしはゼロ近傍で推移している。貸出スプレッドも1990年代半ば以降低下傾向にある。第三に、世界金融危機後の米国の銀行業シェアは日本よりも高いが、これは資金利益、手数料の差による。世界金融危機後、米銀の証券化業務関連の所得は減少したが、伝統的な銀行業務からの所得は減少していない。日本の銀行業が所得を高めるには、預貸業務を再構築することが求められる。
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December 2022
消費者の支払手段選択:諸外国と日本の実証研究の展望

藤木 裕
本稿では、消費者の支払手段選択に関する諸外国と日本の実証研究を展望する。展望される研究は、現金、小切手、銀行預金、クレジットカードといった伝統的な支払手段選択に関する研究と、近年の関心がもたれている新型コロナウイルス感染症、暗号資産、中央銀行デジタル通貨と現金需要・支払手段選択の関係に関する研究である。日本の実証研究の展望の前に、消費者の支払手段選択の研究に日本で利用可能なデータを説明する。
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November 2022
機関投資家の異質性とESG -論文サーベイと日本の企業投資・炭素排出量の実証分析

白須洋子, Yang Baosheng
ESGに対する機関投資家の関心は一様ではない。投資家特性により機関投資家の株式所有とESG関係には違いがあることが議論されている。機関投資家の非同質的特性を考慮し、株式所有とESGとの関係に焦点を絞った研究が必要となっている。本稿ではESG投資、機関投資家とESGの関係について近年の論文を整理しつつ、機関投資家の非同質性とESGに関する実証分析の結果を示す。
実証結果の結果から、機関投資家の中でも、いわゆるモノ言う投資家である外国人投資家及び長期機関投資家は、拡張コーポレート・ガバナンスであるESG活動の中の環境活動のメカニズムを通じて、企業の長期投資を促進し、長期的なイノベーションの増加に繋がることが明らかになった。外国人投資家は短期主義的な成果を追求しがちであるとの見解もあるが、日本市場においては、長期投資家と同様に企業の長期的投資を補完的に促進する役割を果たしている。さらに、近年、投資家に最も注目されているCO2排出量(CO2インテンシティー)についても企業の株式保有構造に影響を及ぼしており、機関投資家の特性によって大きく異なることが判った。CO2排出量に対しては、欧州・北欧の外国人投資家と他の機関投資家とは大きく行動が異なる。企業のESGを分析するにあたって、機関投資家の非同質的な特性を考慮していくことが重要である。
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September 2022
日本型コーポレート・ガバナンスの制度的補完性と進化

内田交謹
本稿では,1980年代前半の銀行借入依存度,金融機関持株比率を用いて,金融面で伝統的な日本のコーポレート・ガバナンスの特徴を有したタイプJ企業を特定し,バブル経済期以降の資本構成・株主構成および経営者のキャリアを分析した。タイプJ企業の経営者は,相反する特徴を有したタイプN企業の経営者と比べて,入社から取締役あるいは経営者に就任するまでの期間が有意に長い。タイプJ企業はまた内部昇進型の経営者を選任する確率が高く,経営者を外部招聘する確率が低い。これらの結果は2010年代にも観察され,金融面での日本型ガバナンスが長期の昇進トーナメントを特徴とする内部管理面での日本型ガバナンスと制度的補完性を持っていたことを示唆している。一方,タイプJ企業は時間とともに借入金比率,負債比率,金融機関持株比率を大幅に低下させ,金融面での日本型ガバナンスの特徴は大きく弱まった。借入金比率の高い企業は昇進トーナメントの期間が有意に短く,金融面での日本型ガバナンスの特徴のうち銀行借入依存は,内部面での日本型ガバナンスを維持する上で必要不可欠なものではなかったといえる。ただし近年においても,金融機関持株比率の高い企業ほど長期昇進トーナメントを実施する傾向が観察される。
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October 2021
コロナ感染症(COVID-19) 拡大下での貯蓄・金融投資行動と個人の主観的認識の役割

祝迫得夫
コロナ感染症によるパンデミックの影響により,家計による一部のサービスや贅沢品に関連した支出が大きく減少し,その一方で定額給付金に代表される政府からのトランスファーがかつてない規模で増加した結果,2020 年度の日本では未曾有の「超過貯蓄」が発生していた.そのような超過貯蓄のほとんどが,銀行預金のような極めて流動性の高い資産の形で保有されており,株式等のリスク資産への投資はほとんど増えていない.独自のアンケートに基づく分析では,マイナスの所得ショックによる貯蓄減が一部の家計に集中して起こっていること,大きく所得が減った個人は資産額も大きく減っていることが分かった。これに対して,所得の増減が一定程度以内に留まった個人は、家族の所得の増減等の自分以外の周辺の環境の影響が大きい一方,所得が顕著に増加した個人は,積極的に貯蓄しようとする個人の意思(intention)が,最も重要な貯蓄の決定要因になっている.
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September 2019
石油価格変動が為替レートとマクロ変数に与える影響: A Multicountry Analysis

祝迫得夫, 中田勇人
本論文では,石油価格変動の背後にある経済的なショックが,各国の為替レートとマクロ変数に与える影響の相対的な重要性について,単一の構造ベクトル自己回帰(VAR)モデルのフレームワークを用いて数量的な評価を試みる.石油価格の変化が,変動相場制を採用しているエネルギー輸入国と輸出国の通貨価値に与える影響を分析するため,オーストラリア,カナダ,日本,ノルウェー,そしてイギリスについて考察を行う.また,以下の4種類の構造ショックが存在することを前提としたVARシステムの識別によって,それぞれのショックが各国の為替レートに与える影響について考察した:(ⅰ)石油供給ショック,(ⅱ)世界的需要ショック,(ⅲ)需給と関連のない原油価格の変動,(ⅳ)他の構造ショックと関連のない純粋な為替レート変動.
その結果,構造ショックに対する反応の違いによって各国間の相関構造をかなりの程度説明することができる一方,為替レートのボラティリティの主要な源泉としては,構造ショックとは関係ない純粋な為替レート・ショックが最も重要性が高いことがわかった.また,オーストラリアと日本に関しては,マクロ変数の変動を説明する上で構造ショックが果たす役割についても考察した.世界的需要ショックならびに需給と関係のない石油価格変動が両国のGDPと輸出成長に対して強い影響を持つ一方で,純粋な為替レート・ショックは日本のマクロ経済変数を説明する上で,相対的に重要度が低いことが分かった.

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March 2019
家計の金融知識と金融資産選択:「金融リテラシー調査」による実証研究

藤木 裕
本研究は、2016年に金融広報中央委員会が行った「金融リテラシー調査」の個票を用いて、以下の結果を得た。まず、株式、投資信託、外貨預金・外貨MMFを購入した経験がある家計は全体の半分以下にとどまり、購入した経験のある家計の中でもこれら三商品の商品性を理解しないで購入している家計が1割程度存在する。次に、複利計算への理解、インフレによる実質価値変動への理解、分散投資の効果に関する理解に関する設問から、国際的に学術研究で用いられている金融リテラシー指数を構築した。金融リテラシー指数が高い値をとる人は、金融商品の商品性への理解が高い人である確率が高く、株式、投資信託、外貨預金・外貨MMFを購入した経験がない人である確率が低い。金融リテラシー指数と家計の金融商品を選択する際の情報入手先の選択にみられる相関関係からは、金融機関店舗における顧客対応へのヒントが得られる可能性がある。
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May 2016
信用金庫再編後の経営改善効果 ―合併効果の推計―

原田喜美枝, 北村仁代
 本稿では、個別信用金庫の財務データを用いて、再編(合併)に巻き込まれた信用金庫の経営改善効果を検証し、収益性、効率性、健全性の観点から、データのプロット、差の検定、パネル分析によって合併効果を推計している。具体的には、合併のあった年を基準として合併前後の期間をとり、合併(または被合併)信用金庫の財務指標の変化が、合併に関与しなかった信用金庫の変化と差があるがどうかを比較する。分析結果より、合併直後、一時収益性は低下するものの、数年以内に合併以前より高くなること、経費削減によって効率性は高まること、特に人件費率の削減が進むこと、自己資本比率の改善が見られることが明らかになった。収益性、効率性の向上から、合併によって経営パフォーマンスは改善することが示唆される。
 本稿の特徴は、再編が加速した2000年代前半の時期を含めて分析し、分析期間中の全合併事例を詳細に調べ、分析対象となる合併事例を抽出したこと、合併のあった年の前後数年間の財務指標を、合併/被合併信用金庫ごとに集計し、合併のあった信用金庫と同都道府県内で同期間に一度も合併に関与しなかった信用金庫の財務指標と比較を行った点にある。地域金融機関の合併が再び増加傾向にあり、金融機関のあり方が模索されている。合併の効果を明らかにすることで、合併が有効な生き残り手段となることを示した。
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September 2015
「量的・質的金融緩和」からの出口における財政負担

藤木裕, 戸村肇
本稿の目的は、日本銀行の量的・質的金融緩和政策が達成された暁の政策運営(出口戦略)で生じる財政負担の試算を行うことである。ベンチマークシナリオとして日本銀行は2016 年度に2 %の「物価安定の目標」を達成した時点で、マネタリーベース目標を破棄し、長期国債の買入れを停止するとともに、短期金利を引き上げると仮定する。その後、日本銀行は、超過準備に政策金利並みの付利を行うとともに、長期国債の市中売却はせず、過去に購入した長期国債が満期を迎えるにつれ、徐々にバランスシートを縮小させると仮定する。この仮定の下では、超過準備がなくなるまでに約20 年が必要である。この間、長期国債からの利息収入が減る一方、巨額の超過準備への利払いが必要となるため、日本銀行の剰余金も10 年以上マイナスになる。ただしこの試算は景気見通しに沿った日本銀行の収益予測ではなくあくまでシナリオ分析であることに注意が必要である。他のシナリオ分析の結果からは、ベンチマークの仮定よりも「物価安定の目標」達成が遅れるほど、あるいは日本銀行券への需要が減るほど、日本銀行の剰余金のマイナス幅が大きくなることが示される。
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