Economic Analysis Series No.188
THE ECONOMIC ANALYSIS

March, 2014
Information and Export Decisions: Bank’s Role as a Conduit of Information
Tomohiko INUI
Keiko ITO
Daisuke MIYAKAWA
Keishi SHOJI
Estimating the Effect of Local Allocation Tax Grants on Local Tax Collection Rates:Verifying the Effect of the Administrative Reform Incentive Assessment and the Distortion Underlying Local Allocation Tax Grants
Mitsunari ISHIDA
Analysis of Determinants of Happiness of Many Countries by Using Support Vector Machine
Kazutoshi TANABE
Takahiro SUZUKI
The Effects of Dividend-Exemption Method on Repatriation of Income from Abroad:
the Case of 2009 Japanese Tax Reform
Eiji TAJIKA
Masaki HOTEI
Keiko SHIBATA
Differences of Job-Change between Public and Private Employment Service
Toru KOBAYASHI
Masahiro ABE
The Impact of Husband’s Job Loss on Divorce
Kazuma SATO
ESRI-PRI-RIETI Joint Open Seminar on the Revitalization of the Japanese Economy
-Economic and Social Research Institute (ESRI), Cabinet Office; Policy Research Institute (PRI), Ministry of Finance; Research Institute of Economy, Trade and Industry (RIETI) -
Economic and Social Research Institute

The full text is written in Japanese.

(Abstract)

Information and Export Decisions: Bank’s Role as a Conduit of Information

By Tomohiko INUI, Keiko ITO, Daisuke MIYAKAWA and Keishi SHOJI

Abstract

This paper examines how firms’ decision to start exporting is affected by the availability of information on export markets. Unlike existing studies which focus on information sharing among firms, we are interested in the information provided by firms’ top lender bank (main bank). Specifically, using a unique dataset containing information on both Japanese firms’ export activities and their main banks’ experience in transacting with other exporting firms, we examine whether main banks act as a conduit of information on export markets. We find that information spillovers through main banks positively affect client firms’ decision to start exporting (extensive margin), implying that information on foreign markets provided by main banks substantially reduces the fixed entry cost of exporting and helps non-exporting client firms to become exporters. Moreover, our results imply that information spillovers through main banks are more important for firms which choose Asia as their export destination. As such firms are more likely to be smaller firms, our results may suggest that main banks play an important role as a conduit of information particularly for smaller firms. Thus, our results highlight that channels of information spillovers other than those examined in the literature so far may be of considerable importance.

JEL Classification Number:F10, F14, G21, L25
Key Words:Export Decision, Lender Bank, Information Spillover, General and Specific Information

Estimating the Effect of Local Allocation Tax Grants on Local Tax Collection Rates: Verifying the Effect of the Administrative Reform Incentive Assessment and the Distortion Underlying Local Allocation Tax Grants

By Mitsunari ISHIDA

Abstract

As part of the Trinity Reform, the Japanese Ministry of Internal Affairs and Communication (MIC) established the Administrative Reform Incentive Assessment (ARIA) program under the local allocation tax (LAT) system during the fiscal year of 2005. This program was aimed at motivating local governments with LAT grants to raise their tax collection rates (TCRs), since a number of economists had asserted that LAT grants eroded the fiscal discipline of local governments.

Our paper uses empirical methods to estimate the effect of the ARIA program and of the distortion underlying LAT grants on the fixed asset tax for land. The major results are follows. First, the ARIA does not stimulate local governments to improve their TCRs with respect to the fixed asset tax. It seems that the amount of the ARIA is insufficient to improve their TCRs, and, furthermore, that the ARIA is not widely appreciated by local governments. Second, the TCRs of local governments with LAT grants were 0.16%~0.18% higher than the TCRs of those that did not. This result implies that local governments with the grants have excessive incentives to collect taxes because the LAT system compensates these authorities for a portion of shrinking their tax base.

JEL Classification Number:H70, H71, H77
Key Words:Local Allocation Tax, Administrative Reform Incentive Assessment, Tax Collection Rate

Analysis of Determinants of Happiness of Many Countries
by Using Support Vector Machine

By Kazutoshi TANABE and Takahiro SUZUKI

Abstract

A large-scale empirical experiment to analyze determinants of national happiness of human well-beings has been carried out based on happiness data of nations in the world as dependent variable and numerous factors as explanatory variables. The correlation between the happiness data containing World Database of Happiness for 149 countries and the data of 56 factors of countries’ indices such as economical, political, social, health, resource, environmental, life-style, and cultural fields was statistically analyzed to evaluate the influence of each factor on happiness. The determinants of happiness across nations were investigated by training non-linear regression support vector machine (SVM) models using the data of happiness and the country factors, and by optimizing the explanatory variables by the sensitivity analysis method. The results indicate that 20 factors satisfactorily represent the happiness data of 130 countries with the root mean squared error of 0.48 and the coefficient of determination of 0.867. A nonlinear regression technique like SVM is crucial for constructing a happiness predicting model due to the high nonlinear relationship between happiness and the explanatory variables. It was also revealed that health is the most important among various factors which influence the happiness due to the large contribution of health factors (e.g. life expectancy and mortality rate) to happiness. It is suggested that the direct contribution of economical factors such as gross domestic product (GDP) to happiness is not significant, but their indirect effect is not negligible through in the health condition.

JEL Classification: J17, D6, I3,
Key words: happiness, determinant analysis, World Database of Happiness, support vector machine

The Effects of Dividend-Exemption Method on Repatriation of Income from Abroad:
the Case of 2009 Japanese Tax Reform

By Eiji TAJIKA, Masaki HOTEI and Keiko SHIBATA

Abstract

Japan made a major reform of its international tax system in 2009 by moving from the residential to divided-exemption method. Using the new law, Japanese parent companies can now receive 95% of dividend from their foreign subsidiaries free from domestic tax. Since the rate of corporate-income tax in Japan is one of the highest of the world, this reform should give good incentives for Japanese companies to increase the repatriation of income from abroad. The purpose of this paper is twofold: the first is to test whether the reform increased the dividend from foreign subsidiaries; and the second is to look more carefully which companies have reacted more sharply to the new law. The answer to the first question is shown to be in the affirmative, but the answer to the second question depends on financial situation of parent companies: those with either higher (more than median) investment-to-cash flow or debt-to-cash flow ratios increased their remittance, but those with smaller ratios did not. In short, our study shows that the reaction of Japanese parent companies to the new tax system is influenced by their financial dependence on the income of their foreign subsidiaries.

JEL Classification Number:H25, G35, F23
Key Words:Dividend-exemption method, Foreign subsidiaries, Repatriation of income

Differences of Job-Change between Public and Private Employment Service

By Toru KOBAYASHI and Masahiro ABE

Abstract

The purpose of this paper is making the difference between Job-Changes handled by Public Employment Service and that handled by Private one clear by analyzing the data of Working Person Survey. Specifically, we note that whether features of individual characteristics and outcomes of Job-Change which contain changes of income, industry, occupation and firm-size are different.

With results of analyses, we obtained mainly three findings as follows. First, the individual characteristic of those who is searching new job by Public Employment-service is obscure. Nevertheless, people who had changed their job by Public Employment-service are limited with specific characteristics which are less-education, less-income, and more aged. In contrast to this, people who are searching new job by Private Employment services and had changed their job by Private Employment-service are limited with specific characteristics which are younger and higher-education.

Second, Job-change with using Public Employment-service causes industrial and occupational change more frequently than with using Private Employment-service. In addition, in the case of changing by Private Employment-service, possibility of changing to bigger firm was noticeably significant. Contrary with Public Employment-service, Firm-size slightly became smaller.

Finally, Job-Change by Private Employment-service makes income mostly higher, but by Public Employment-service income likely to become smaller. This finding isn’t different from what previous papers stressed. Although the new finding from our analysis is that if firm-size is same before and after the Job-Change, the income-effect of both Public and Private Employment-service are not found clearly.

JEL Classification Number:J24, J28, J64
Key Words:Job change, Employment-service, Matching

The Impact of Husband’s Job Loss on Divorce

By Kazuma SATO

Abstract

The purpose of this paper is to examine the impact of the husband’s job loss on divorce by using the Keio Household Panel Survey (KHPS) and Japanese Panel Survey of Consumers (JPSC). The Japanese labor market has deteriorated and unemployment rate has also increased since the collapse of the bubble economy. The rise of unemployment rate had a great impact on the Japanese household, and augmented the husband’s job loss. This husband’s job loss led to suppression of consumption, usage of savings, and an increase in the wife’s labor supply. Furthermore, it was thought to have impact on family dissolution. Although, Charles and Stephens (2004) and Doiron and Mendolia (2012) examined this relationship in overseas studies, there are only a few such studies in Japan. Therefore, the impact of husband’s job loss on divorce is examined in this paper. Two key points are uncovered as a result of analysis.

Firstly, the results of the analysis using the KHPS reveal that the husband’s job loss at two years ago increases the probability of divorce. On the other hand, the results of the analysis using the JPSC reveal that the husband’s job loss at one year ago increases the probability of divorce. These results indicate that husband’s job loss at one or two year ago causes family dissolution. Secondly, the results of the analysis which add the husband’s earning difference to independent variables reveal that the impact of the husband’s job loss on divorce is not changed. These results indicate that the factor of husband’s job loss except for fluctuation of earning is considered to affect the probability of divorce. As Charles and Stephens (2004) pointed out, job loss is regarded as a stigma that is likely to be regarded negatively by the spouse.

JEL Classification Number:J12, J13, J23
Key Words:Divorce, Husband’s Job Loss, Keio Household Panel Survey

ESRI-PRI-RIETI Joint Open Seminar on the Revitalization of the Japanese Economy
-Economic and Social Research Institute (ESRI), Cabinet Office; Policy Research Institute (PRI), Ministry of Finance; Research Institute of Economy, Trade and Industry (RIETI) -

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