Economic Analysis Series No.186
THE ECONOMIC ANALYSIS

January, 2013
Entry of Foreign Multinational Firms and Productivity Growth of Domestic Firms: An Empirical Analysis Based on the Firm-Level Data Underlying the Basic Survey on Business Structure and Activities
Keiko ITO
The effects of class size on cognitive and non-cognitive abilities
Minae NIKI
Effect on the Finances of Local Governments in the Case of an Earthquake Occurring Directly Beneath the Tokyo Metropolitan Area: Projections by Year and Prefecture
Takeshi MIYAZAKI
The Effects of Smoothing of the Renewal Fees on Patent Option Value
Setsuo YAMADA
The Effect of Recreational Goods Price on Fertility
Shiho YUKAWA
The Wife's Employment Change Before and After the Husband's Unemployment
Kazuma SATO
The Development of Human Resource Management and its Effect on Turnover Rate in Family Firm
Tsukasa MATSUURA
Tomohiko NODA
A Dynamic Computable General Equilibrium Analysis of Border Adjustments for Climate Change Policy.
Shiro TAKEDA
Susumu SUZUKI
Toshi H. ARIMURA

The full text is written in Japanese.

(Abstract)

Entry of Foreign Multinational Firms and Productivity Growth of Domestic Firms: An Empirical Analysis Based on the Firm-Level Data Underlying the Basic Survey on Business Structure and Activities

By Keiko ITO

Abstract

This paper examines whether and how the entry of foreign multinational firms affects the productivity growth of domestically-owned firms, i.e., foreign direct investment (FDI) spillover effects, using a large-scale Japanese firm-level dataset including a large number of services firms. The results suggest that foreign presence in a particular industry does not generate positive spillover effects and both in manufacturing and service sector industries in fact tends to negatively affect the productivity growth of domestically-owned firms. Moreover, the negative FDI spillover effect tends to be larger in the service than in the manufacturing sector, implying that there may be systematic differences in FDI spillover effects between these sectors. However, the negative spillover effects are smaller for firms catching up towards the productivity frontier than for other firms, and in the long run, their productivity growth is positively associated with foreign presence in the same industry. Nevertheless, the overall effect of inward FDI is still negative and further investigation on which factors lead to positive FDI spillovers is desirable.

A possible interpretation of these results is that foreign entry increases the productivity gap between firms with high productivity growth and other firms. If this interpretation is correct, the results suggest that to raise macro-level productivity growth, the promotion of inward FDI should be accompanied by policies to encourage firms with low productivity growth to accelerate their productivity growth or to force them to exit from the market.

JEL classification Number: F21, L1, L23
Key words: foreign direct investment; foreign-owned firms; service sector; productivity; spillovers

The effects of class size on cognitive and non-cognitive abilities

By Minae Niki

Abstract

The trend towards class size reduction has accelerated over the last decade. However, it is not clear whether small class sizes actually increase the quality of education enough to justify the downsizing cost. This paper intends to capture the effects of class size by using an education production function and by estimating the effects focusing on the following two points. First, we evaluate various aspects of class size effects. This paper uses TIMSS2003 Mathematics and Science data for Japanese public schools' 8th grade students to estimate the effects of class size on academic achievements and four non-cognitive ability measures ("High motivation", "Confidence", "Utility", "Belong"), which are estimated by using factor analysis to allow quantitative interpretation. Second, we control for endogeneity of class size that results from non-random assignments of students to class. This paper uses the Regression-Discontinuity-Design method which eliminates such biases. We obtained the following two results. First, we did not find a significant relationship between reductions in class size and academic achievements in both subjects. Second, regarding the non-cognitive ability measures, we found that in mathematics "Confidence" increases with class size reduction.

JEL Classification Number: I21, I28
Key words: Class size, non-cognitive ability, Regression-Discontinuity-Design

Effect on the Finances of Local Governments in the Case of an Earthquake Occurring Directly Beneath the Tokyo Metropolitan Area: Projections by Year and Prefecture

By Takeshi MIYAZAKI

Abstract

Very few studies have made projections by local government unit or number of years elapsed after an earthquake disaster occurring directly beneath the Tokyo metropolitan area (northern Tokyo Bay earthquake) for the amount of the burden that local governments would bear, the amount that would be spent from general revenue revenues, or the amount of change that would be made to the ordinary local allocation tax. Therefore, I estimated the impact of an earthquake occurring directly beneath the Tokyo metropolitan area on the finances of local governments.

The estimation revealed the following insights. First, the financial burden that local governments would bear for earthquake disaster related projects in the case of the earthquake would be 24.3-30.4 trillion yen over five years, and in the third year after the earthquake disaster, the burden ratio to general revenue resources would be 33.6-42.1% and the ratio to the total amount of the local allocation tax would be 32.5-39.8%, which indicates great financial burdens for the central and local governments. Second, the burden that local governments would bear for rehabilitation projects would have little effect on the finances of local governments, whereas the burden for reconstruction projects would have an immense effect on the finances of local governments. Third, the Tokyo Metropolitan Government would bear the greatest burden of the local governments in the case of an earthquake occurring directly beneath the Tokyo metropolitan area, but Saitama Prefecture would bear the least burden.

JEL Classification Number: H72, H74, Z0
Key words: Earthquake beneath the Tokyo metropolitan area, Burden for reconstruction projects, Finances of local government

The Effects of Smoothing of the Renewal Fees on Patent Option Value

By Setsuo Yamada

Abstract

This paper aims to construct a patent option model suitable for the Japanese patent system, and then to explore empirically the economic effects caused by the significant revision of the Japanese patent maintenance fees in 1998. The revision of patent law in 1998 fundamentally changed the fee schedule so that payments peaked in ten to twelve year after patent registration, followed by a level off, which resulted in major fee reductions. This was a very bold change in the patent fee structure compared to historical structures of patent fee maintenance in Japan and other major countries. The leveling-off of patent maintenance fees was aimed to reduce cost burden on patent owners and to give incentives to their R&D activities. In addition, it served to contain the special patent account's rising surplus. The simulation results based on the patent option model show that the introduction of the leveling-off maintenance fees enables the patent to hold the patent term longer, while minimizing the influence on the patent option value. However, it is confirmed to have a relatively substantial effect on reducing patent fee revenues.

JEL Classification Number: O31, O32, O34
Key Words: patent option value, renewal fees, optimal stopping problem

The Wife's Employment Change Before and After the Husband's Unemployment

By Kazuma SATO

Abstract

This paper examines the wife's added worker effect before and after husband's unemployment by using the retrospective employment history of the Keio Household Panel Study (KHPS). As a result of the analysis, following three points become apparent. First, wife's added worker effect is confirmed within 6 years of husband's unemployment. In addition, its effect that was measured by marginal effects has gradually decreased. Second, as a results of the analysis of the wife's selection for new forms of employment using retrospective panel data, the added worker effect due to the husband's unemployment is confirmed. Especially, non-regular employment and job search are sensitively stimulated by husband's unemployment. Married women, whose husband was unemployed, tend to begin job search and enter the labor market through non-regular employment that is relatively easy to get job. Third, after husband unemployed, husband's employment ratio has been not only declining, but also his income tends to decrease, even if he could find new job. This means that husband's permanent income has declined within several years of his unemployment. This will be the reason why wife's added worker effect was induced after several years of husband's unemployment. In addition, as the savings tends to decline after husband's unemployment, household is considered to use their savings to cope with the income reduction.

JEL Classification Number:J21,J64,J16
Key Word:Added Worker Effect, Husband's Unemployment, Panel Data

The Development of Human Resource Management and its Effect on Turnover Rate in Family Firm

By Tsukasa MATSUURA, Tomohiko NODA

Abstract

This paper examines the hypothesis that human resource management is less developed in family firms than in non-family firms and it has no effect of lowering turnover in family firms.

From our analysis, the following main findings were obtained. First, compared to non-family firms, turnover rates and average length of service are higher in family firms, although the difference is not statistically significant for average length of service. Second, the institutions for human resource management are more developed in non-family firms than in family firms, although the coefficient is not significant in the case of bonus and reappointment of a person who has mandatorily retired. Third, human resource management lowers turnover rate, when the systems of periodic salary increase and training for manager are introduced in non-family firms which earn over 100 million yen sales, or hire over 100 employees, but it does not in family firms. Fourth, labor union lowers turnover rate in non-family firms which earn over 100 million yen sales, or hire over 100 employees, but it does not in family firms. Fifth, the systems of bonus and reappointment lower turnover rate in family firms which earn fewer than 100 million yen sales, or hire fewer than 100 employees. Finally, the negative correlation between the number of employee and turnover rates disappears when controlling the systems of human resource management.

These results show that the development of human resource management and its effect on turnover rate differ between family firms and non-family firms.

JEL Classification Number:J53, J63, L20
Key Words:Family Firm, Human Resource Management, Turnover

A Dynamic Computable General Equilibrium Analysis of Border Adjustments for Climate Change Policy.

Shiro Takeda, Susumu Suzuki, Toshi H. Arimura

Abstract

Using a multi-region, multi-sector computable general equilibrium model, this paper studies economic impacts of border adjustments for climate change policy. Our model is a 12 regions, 22 sectors recursive dynamic model from 2004 to 2020 and we use GTAP7.1 for a benchmark dataset. We assume that the developed regions (Annex B regions) impose carbon regulations and analyze what impacts border adjustments have on carbon leakage, energy-intensive trade-exposed (EITE) sectors, GDP and welfare.

Our main results are summarized as follows. First, border adjustments are effective in reducing carbon leakage but the size of effects is small. Second, border adjustments generally tend to restore international competitiveness of EITE sectors but it strongly depends on which countries and sectors. In addition, we show that border adjustments are especially beneficial for Japanese iron-steel sector. Third, the impacts of border adjustments on GDP and welfare are generally small.

JEL Classification Number: Q54, C68, F18
Key Words: climate change policy, border adjustment, emissions trading, computable general equilibrium analysis (CGE analysis)

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