Essays on Japan's trade and industrial structure.

Abstract

Chapter I presents an analysis of the effects of market structure on the propensity of firms to dump goods. The analysis of Brander and Krugman is extended to show that in the presence of transportation costs, bilateral intra-industry trade is not possible without dumping. Contrary to the conventional wisdom, this chapter finds that firms in markets with a large number of domestic competitors are more prone to dump unilaterally than firms in less competitive markets. This dumping is not predatory but may result in export prices being below average cost. In Chapter II the analysis assesses the effects of labor markets on firm behavior in Japan and the US. Most Japanese workers in large firms are members of firm-based enterprise unions while workers in the US, if organized at all, tend to be members of trade or industrial unions. This chapter examines how differences in union structure and membership can affect firm behavior in a Pareto optimal contracting framework. The findings are that oligopolistic firms with enterprise unions will tend to hire excessive amounts of labor and tend to engage in dumping. Furthermore, it is shown that by organizing as an enterprise union and firm, the firm and its employees can be made better off relative to not being organized at all. The third chapter demonstrates that in a free entry equilibrium residual profits due to the integer problem may be quite high even in relatively unconcentrated industries. This provides a clear incentive for governments to subsidize entry by funding research and development in order to ensure that the industry is composed of domestic firms that can transfer the international rents back to the home country. These rents will not be shifted or eroded. Moreover, the number of firms in the equilibrium will not change if licensing of technology is allowed. Although the foreign government is basically helpless if it tries to shift the profits through simple R&D subsidies, it can shift profits back to its own firms by forming a research joint venture.