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Political conflict between nations sometimes leads to consumer boycotts. We examine the regional impacts of bilateral boycott activity by investigating the 2019 Korean consumer boycott of travel to Japan. Employing triple- and double-differences designs, we find that the impact of the boycott is large and regionally heterogeneous. Japanese prefectures with high (i.e., 75th percentile) pre-boycott dependency on visitors from Korea suffer bilateral export losses of 56.9 to 60.9 percent and aggregate export losses of 10.5 to 13.3 percent. Prefectures with low (i.e., 25th percentile) Korea dependency experience bilateral losses of 47.8 to 49.7 percent and aggregate losses of 3.3 to 4.2 percent.

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Factor Intensity Reversals Redux: Feenstra Is Right!

Kiyota, Kozo and Yoshinori Kurokawa

Review of International Economics 30 ( 4 ) 885 - 914 2022.09

Research paper (scientific journal), Single Work, Accepted

Two‐ or more‐factor general equilibrium models commonly assume no factor intensity reversals (FIRs): a good that is relatively capital intensive compared with other goods within a country/region is also relatively capital intensive within another country/region. This assumption is so important that its breakdown results in the collapse of several well‐known theorems, such as the Heckscher–Ohlin theorem and the Stolper–Samuelson theorem. Seeing a recent observation, however, Feenstra (2015, Advanced international trade: Theory and evidence (2nd ed.), Princeton University Press) argues that FIRs are quite realistic. Our nonparametric test finds that recent regional‐level data support his view. At the two‐digit industry level, the degree of FIRs among regions is higher than those found in previous studies, which is accompanied by wide differences in relative factor prices among regions. The degree has also increased over the last two decades. FIRs are even stronger at the disaggregated four‐digit industry level and, though not many, exist at the two‐aggregated‐industry level as well. At all the three levels, FIRs do not disappear even when we take into account other factors such as human capital and land. Thus, considering a model without restrictions on FIRs might be a possible direction of research.

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The COVID-19 Pandemic and the World Trade Network

Kiyota, Kozo

Journal of Asian Economics 78 2022.02

Research paper (scientific journal), Single Work, Accepted, ISSN 10490078

Global trade suffered a significant contraction in 2020 as a result of the COVID-19 pandemic, and its growth is expected to remain below the pre-pandemic trend. Did the relative importance of countries in the world trade network change as a result of the pandemic? The answer to this question is particularly important for the Association of Southeast Asian Nations (ASEAN) countries because of their relative importance in world trade as well as their strong trade linkages with China, where the COVID-19 virus originated. This paper examines how the world trade network has changed since the COVID-19 pandemic, with a particular focus on ASEAN countries. Tracking the changes in centrality from January 2000 to March 2021, we find no evidence for most ASEAN and major trading countries that centrality changed significantly after the pandemic began. Our results suggest the resilience of the trade pattern for these countries.

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Impacts of Protectionism and Political Conflict: Recent Developments

Kiyota, Kozo

The International Economy 25 1 - 18 2022

Research paper (scientific journal), Single Work, Lead author, Last author, Corresponding author, Accepted, ISSN 18844367

With the growing concerns about increasing protectionism, several empirical studies have investigated the effects of protection. While these studies presented interesting and important findings, few of them have discussed their frameworks and results in a comprehensive manner. This paper reviews these recent studies. We first show that they mainly employ either quantitative trade models or difference-in-differences design to investigate protectionism. We then discuss the strengths and limitations of these approaches. Finally, we consider possible directions for future research.

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The China Syndrome: A Cross-Country Evidence

Kiyota, Kozo, Sawako Maruyama, and Mina Taniguchi

The World Economy 44 ( 9 ) 2758 - 2792 2021.09

Research paper (scientific journal), Joint Work, Accepted

While in many advanced countries the increasing import competition from China on employment is a major concern for policymakers and the general public, its impact of Chinese import competition could be different across countries, depending upon the volume and the composition of the products. This paper examines the impact of the China shock on employment in six advanced countries. We find that the import penetration of final goods from China has negative effects on manufacturing employment in these countries, whereas the import penetration of intermediate inputs from and the exports to China could have positive effects. Moreover, such positive effects could offset or even outweigh the negative effects in some countries. These results together suggest that a careful interpretation is needed when evaluating the external validity of the China shock that is obtained in one country.

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The Leontief Paradox Redux

Kiyota, Kozo

Review of International Economics 29 ( 2 ) 296 - 313 2021.05

Research paper (scientific journal), Single Work, Accepted

Shortly after Edward E. Leamer found that the Leontief Paradox was based on a simple conceptual misunderstanding in 1980, Richard A. Brecher and Ehsan U. Choudhri in their 1982 article argued that the fact that the United States exported labor services was, in itself, paradoxical because it is true if and only if its per capita consumption is less than the world average. Surprisingly, however, no formal answer to this paradox has been provided for nearly four decades. This paper revisits this paradox and formally shows that the paradox can be resolved if the Heckscher–Ohlin–Vanek model takes into account technology differences across countries and trade imbalance. In contrast, the paradox cannot be resolved even if the analysis takes into account quasi‐homothetic preferences, the Armington home bias, or offshoring.

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Factor intensity Reversals Redux: Feenstra is right!

Kiyota, Kozo and Yoshinori Kurokawa

Review of International Economics 2021

Research paper (scientific journal), Joint Work, Accepted, ISSN 09657576

Two- or more-factor general equilibrium models commonly assume no factor intensity reversals (FIRs): a good that is relatively capital intensive compared with other goods within a country/region is also relatively capital intensive within another country/region. This assumption is so important that its breakdown results in the collapse of several well-known theorems, such as the Heckscher–Ohlin theorem and the Stolper–Samuelson theorem. Seeing a recent observation, however, Feenstra (2015, Advanced international trade: Theory and evidence (2nd ed.), Princeton University Press) argues that FIRs are quite realistic. Our nonparametric test finds that recent regional-level data support his view. At the two-digit industry level, the degree of FIRs among regions is higher than those found in previous studies, which is accompanied by wide differences in relative factor prices among regions. The degree has also increased over the last two decades. FIRs are even stronger at the disaggregated four-digit industry level and, though not many, exist at the two-aggregated-industry level as well. At all the three levels, FIRs do not disappear even when we take into account other factors such as human capital and land. Thus, considering a model without restrictions on FIRs might be a possible direction of research.

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Japan's Outward FDI Potential

Greaney, Theresa M. and Kozo Kiyota

Journal of the Japanese and International Economies 57 2020.09

Research paper (scientific journal), Joint Work, Accepted, ISSN 08891583

While Japan's outward FDI stock is historically high, it is not necessarily clear whether there is untapped growth potential, given the economic size of Japan and that of partner countries. This paper examines whether Japan's actual outward FDI stock is high or low relative to the FDI predicted by the gravity model using the outward FDI patterns of all OECD nations, which we call counterfactual FDI. The results indicate that the ratio of Japan's actual to counterfactual FDI is the highest among the OECD countries as of the year 2015. The regional distribution of Japan's actual to counterfactual FDI favors Southeast Asian nations, South Africa and the US. These results imply that Japan has no unrealized potential for outward FDI.

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Multinationals, Intra-firm Trade and Employment Volatility

Kiyota, Kozo, Toshiyuki Matsuura, and Yoshio Higuchi

Canadian Journal of Economics 53 ( 3 ) 982 - 1015 2020.08

Research paper (scientific journal), Joint Work, Accepted, ISSN 00084085

This paper examines the theoretically ambiguous relationship between the volatility of employment growth and the foreign exposure of firms. We employ unique Japanese firm-level data during the period of 1994 to 2012. This allows us to investigate any differences in this relationship across multinational firms and trading and non-trading firms, manufacturing and wholesale trade and intra-firm and inter-firm trade. One major finding is that, in manufacturing, employment volatility increases as the share of intra-firm exports to total sales increases. In contrast, in wholesale trade, employment volatility declines as the share of intra-firm imports to total imports increases. One possible interpretation of these results is that the transmission of foreign supply and demand shocks could be through not only manufacturing but also wholesale trade firms. Further, a higher share of intra-firm trade could magnify foreign demand shocks in manufacturing and could mitigate foreign supply shocks in wholesale trade.

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The Gravity Model and Trade in Intermediate Inputs

Greaney, Theresa M. and Kozo Kiyota

The World Economy 43 ( 8 ) 2034 - 2049 2020.08

Research paper (scientific journal), Joint Work, Accepted, ISSN 03785920

Is the gravity model as applicable to trade in intermediate inputs as it is to trade in final goods? One of the contributions of this paper is that we explicitly account for the dual nature of products that can be used as either intermediate inputs or final goods. We find that the structural gravity model performs extremely well for describing bilateral trade in final goods and in intermediate inputs. Moreover, this continues to hold even when we focus on a subset of countries in which intermediate inputs trade accounts for a growing share of trade, namely "Factory Asia." However, the gravity model may perform poorly due to model misspecification (i.e., exclusion of intranational trade) and/or sample selection, even after the model considers the dual nature of products. We demonstrate that the poor performance of the gravity model is not attributable to the large trade flow of intermediate inputs, which supports the continued use of the model as these trade flows continue to grow in importance worldwide.

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What's Behind The Figures? Quantifying The Cross-country Exporter Productivity Gap

Kiyota, Kozo, Toshiyuki Matsuura, and Lionel Nesta

Economic Inquiry 57 ( 3 ) 1256 - 1271 2019.07

Research paper (scientific journal), Joint Work, Accepted, ISSN 00952583

We present a simple framework that allows us to examine the cross-country exporter productivity gap without accessing confidential firm-level data. This gap depends on the three readily available statistics: the productivity gap between two countries; the export participation rates; and export premia. This gap holds irrespective of the distribution underlying firm productivity and irrespective of the presence of fixed costs. Under specific conditions, allocative efficiency may affect the exporter productivity gap. The empirical analysis globally validates this exercise. (JEL F1, D24).

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Potential for Inward Foreign Direct Investment in Japan

Hoshi, Takeo and Kozo Kiyota

Journal of the Japanese and International Economies 52 32 - 52 2019.06

Research paper (scientific journal), Joint Work, Accepted, ISSN 08891583

Promotion of inward foreign direct investment (FDI) into Japan has been an important policy in the Abenomics growth strategy. This paper examines if we observe positive impacts of the policy in the data. We first estimate a gravity model of bilateral FDIs using data for 35 OECD countries as destination countries. In estimating the model, we handle zero values for FDI stock explicitly. The model includes (origin and destination) country-specific effects as well as destination-country specific time trends. We take the model prediction as a reasonable counterfactual and compare that to the actual inward FDI stock for Japan. Although the actual inward FDI stock has been growing and is likely to achieve the goal of 35 trillion yen by 2020, the growth under the Abe administration has been comparable to or slightly lower than the counterfactual suggested by the estimated model. We also estimate the model without Japan as a destination country and use the estimated model to calculate the counterfactual level of Japan's inward FDI. Although we expect the gap between the counterfactual and the actual become narrower if Abenomics policy has been successful, we fail to find that. These results cast a doubt on the effectiveness of the Abenomics policies to encourage inward FDI at least as of 2015.

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Labor Market Imperfections, Markups and Productivity in Multinationals and Exporters

Dobbelaere, Sabien and Kozo Kiyota

Labour Economics 53 198-212 - 212 2018.08

Research paper (scientific journal), Joint Work, Accepted, ISSN 09275371

This paper examines the links between a firm's internationalization status and the type and degree of market imperfections in product and labor markets. We develop a framework for modelling heterogeneity across firms in terms of (i) product market power (price-cost markups), (ii) labor market imperfections (workers’ bargaining power during worker-firm negotiations or a firm's degree of wage-setting power) and (iii) revenue productivity. We apply this framework to analyze whether the pricing behavior of firms in product and labor markets differs across firms that engage in different forms of internationalization using an unbalanced panel of 7,458 manufacturing firms over the period 1994-2012 in Japan. Engagement in international activities is found to matter for determining not only the type of imperfections in product and labor markets but also the degree of imperfections. Clear differences in behavior between firms that serve the foreign market either through exporting or through FDI are observed. Exporters are more likely to be characterized by imperfect competition in the product market whereas the opposite holds for multinationals. Exporters are more likely to share rents based on the bargaining power of workers whereas a firm's wage-setting power seems to generate wage dispersion across firms with foreign subsidiaries.

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On the Demand for Female Workers in Japan: The Role of ICT and Offshoring

Kiyota, Kozo and Sawako Maruyama

Asian Economic Papers 17 ( 2 ) 25 - 46 2018.06

Research paper (scientific journal), Joint Work, Accepted, ISSN 15353516

This paper examines the determinants of the demand for female workers, focusing on the role of information and communication technology (ICT) and offshoring. Estimating a system of variable factor demands for manufacturing industries between 1980 and 2011, we find that, whereas the ICT capital stock has significantly positive effects on the demand for low-, middle-high-, and high-skilled female workers, it has significantly negative effects on the demand for middle-low-skilled female workers. In contrast, offshoring has insignificant effects on the demand for female workers, which suggests that offshoring is at least neutral on the demand for female workers.

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ICT, Offshoring, and the Demand for Part-time Workers: The Case of Japanese Manufacturing

Kiyota, Kozo and Sawako Maruyama

Journal of Asian Economics 48 75-86 2017.02

Research paper (scientific journal), Joint Work, Accepted

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Misallocation and Productivity: The Case of Vietnamese Manufacturing

Doan Thi Thanh Ha, Kozo Kiyota, and Kenta Yamanouchi

Asian Development Review 40 31-42 2016.09

Research paper (scientific journal), Joint Work, Accepted

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Assessing the Effects of Japanese Industrial Policy Change during the 1960s

Kiyota, Kozo and Tetsuji Okazaki

Journal of the Japanese and International Economies 40 31-42 2016.06

Research paper (scientific journal), Joint Work, Accepted

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