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

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

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

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

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

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

Taxonomy and chemical characterization of new antibiotics produced by Saccharothrix SA198 isolated from a Saharan soil

Actinomycete strain SA198, isolated from a Saharan soil sample of Algeria, exhibited antimicrobial activity against Gram-positive and Gram-negative bacteria, and phytopathogenic and toxinogenic fungi. The morphological and chemotaxonomic characteristics of the strain were consistent with those of the genus Saccharothrix. Analysis of the 16S rRNA gene sequence of strain SA198 showed a similarity level ranging between 97.2 and 98.8% within Saccharothrix species, S. australiensis being the most closely related. Two new active products were isolated by reverse HPLC using a C18 column. The ultraviolet–visible (UV–VIS), infrared (IR), mass, and 1Hand 14C nuclear magnetic resonance (NMR) spectra showed that these products were new bioactive compounds. The minimum inhibitory concentrations of these antibiotics showed a strong activity against fungi and moderate activities against Gram-positive and Gram-negative bacteria

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

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

A Structural Estimation Approach to an Asymmetric Auction Model for the Japanese Retail Power Market

In this paper, we develop a structural auction model and quantify the effects of policy measures aiming to enhance competition in the Japanese retail power market. We employ a theoretical model that incorporates asymmetries between the incumbent and entrants in terms of both the cost and information structures, where the costs of the former are assumed common knowledge, and empirically estimate the structural parameters characterizing their cost distributions using public power procurement data. We then conduct counterfactual simulations to quantify two competition-promoting policy measures: a bid reference program for entrants, and an increase in the number of potential bidders. We take a parametric approach to estimate the structural model successfully in contrast to a nonparametric approach that previous studies took. Our simulation results show that these procompetitive measures would barely increase participation by potential entrants but would elicit more aggressive incumbent bidding behavior. Further, a modest bid-preferential rate would improve welfare and reduce the probability of realizing inefficient allocations associated with a costly winning bidder.JEL Classification Codes: L94, H57, C54http://www.grips.ac.jp/list/jp/facultyinfo/hosoe_nobuhiro

Illicit dealings: Fossil fuel subsidy reforms and the role of tax evasion and smuggling

This study develops a computable general equilibrium model for Nigeria to study the impact of fossil fuel subsidy reform - and energy taxes - on key economic parameters, including consumption, income distribution, tax incidence, and fiscal efficiency. The model also examines the role of informality, tax evasion, and fuel smuggling, and shows that these factors can substantially strengthen the argument in favour of subsidy reform. The study shows that redistributing revenues from subsidy reform using uniform cash transfers has a strong progressive (i.e. pro-poor) distributional effect. Moreover, redistributing reform revenues by cutting pre-existing labour taxes not only increases fiscal effciency, but also reduces the welfare losses associated with tax evasion, which in turn reduces the welfare costs of reform by up to 40%. Regardless of the method of revenue redistribution, reducing subsidies diminishes the incentives for fuel smuggling, and hence the welfare losses associated with it.The authors gratefully acknowledge that this work was supported by a JSPS KAKENHI Grant (No. 16K03613).http://www.grips.ac.jp/list/jp/facultyinfo/hosoe_nobuhiro

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

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

Efficacy of Japan's Policy Options against Trump’s Tariffs

https://www.grips.ac.jp/list/jp/facultyinfo/hosoe_nobuhiro/This study analyzes the impact of additional tariffs and reciprocal tariffs on US imports, which were announced immediately after the inauguration of the second term of the Trump administration, using a computable general equilibrium model. Our simulations show that China, which is subject to high tariffs, and Canada and Mexico, whose supply chains are closely connected by trade, suffer large economic welfare losses, while other countries and regions do not suffer much from Trump’s tariffs. Welfare in the US varies greatly depending on whether tariff revenues are spent on government consumption or returned to households, and in the latter case, the US would gain in welfare. Considering the countermeasures that Japan can take against Trump’s tariffs, Japan could maximize its welfare (or minimize its losses due to Trump’s tariffs) by imposing retaliatory tariffs of about 15% on the premise that tariff revenues would be returned to households, but only marginally. Rather than raising tariffs, it would be of great welfare benefit for Japan to eliminate tariffs on imports from the US, even if it is unilateral. Also, Japan’s retaliatory tariffs would inflict only small losses on the US, which would be far from sufficient for motivating the US to withdraw the additional or reciprocal tariffs.technical repor