Selected Current Research by Shuichiro Nishioka (September 2009)

"Development-Related Biases in Factor Productivities and the HOV Model of Trade"

(with Keith E. Maskus, Canadian Journal of Economics Vol.42 No.2, May 2009: p519-553)

Past empirical failures of the basic Heckscher-Ohlin-Vanek (HOV) model related to the inability of data to meet its restrictive assumptions, particularly identical international technologies and factor price equalization. Trefler (1993) tried to resuscitate HOV by introducing a simple Hicks-neutral (HN) factor-productivity adjustment, an approach that was heavily criticized. In this paper, we re-examine the productivity question by estimating factor-specific productivities from the individual technology data of multiple countries. Using a dataset of 29 countries, both developed and developing, we find evidence of factor-augmenting technological differences. In particular, the factor-productivity adjustment works well for developed members of the OECD. Further, we find that the ratios of factor productivities are strongly correlated with corresponding factor endowments. This systematic bias implies that the ability of HOV to explain North-South factor trade depends both on relative factor abundance and factor-augmenting productivity gaps.

Full-Text: Development-related...(CESifo Working Paper Series No. 2253)

“The Internationalization of Japanese Firms: New Findings Based on Firm-Level Data”

(with Wakasugi, R., Todo, Y., Sato, H., Matsuura, T., Ito, B., Tanaka, A)

Using firm-level data for the Japanese manufacturing sector, we examine characteristics of internationalized firms, i.e., firms engaging in export and/or foreign direct investment (FDI), and compare these characteristics with those for selected European countries. We find that internationalized firms are a few and that their productivity is higher than that of non-internationalized firms, confirming the findings of existing studies on Japan and other countries. In addition, we find that productivity differences between non- internationalized firms, exporters, and FDI firms are substantially smaller in Japan than in the European countries. This evidence suggests that productivity differences alone cannot determine export or FDI behavior of Japanese firms.

Full-Text: The Internationalization... (RIETI Discussion Paper Series 08-E -036)

“An Explanation of OECD Factor Trade with Knowledge Capital and the HOV Model”

This study examines the international factor trade of the OECD countries within the Heckscher-Ohlin-Vanek (HOV) model. In this paper a previously unexplored factor, knowledge capital (measured by cumulative R&D stock), is introduced into the HOV framework. Although previous literature proposed the importance of knowledge accumulation for comparative advantages theoretically and conceptually, this is the first empirical evidence with complete dataset of fifteen OECD countries. Knowledge capital plays an important role in determining comparative advantage among OECD countries. Knowledge capital itself is an important direct input for production and is an explanatory variable to account for international differences in factor-augmenting productivity. Robustness of present result is confirmed when knowledge spillovers are introduced under the assumption that knowledge capital entails non-rival character.

“Reconsidering the Role of Capital Accumulation for International Specialization across Industries” (under review)

Whether countries specialize in particular subsets of industries as they accumulate production factors is a primary question of testing the Heckscher-Ohlin-Vanek (HOV) model. Davis and Weinstein (2001) provided evidence that the global data supports the HOV model when national techniques are modified so as to reflect countries’ capital abundances. However, once factor trades are measured bilaterally from the producer countries’ techniques, the HOV prediction could be supported without specialization. This paper examines the relative importance of across-industry specialization versus technical differences for Davis and Weinstein’s evidence and finds that their evidence does not depend on specialization. The HOV model cannot provide evidence for specialization regardless of the relaxation in identical techniques since the technical variation across industries is negligibly smaller than that across countries. Capital accumulation likely sophisticates a country’s techniques across all industries but does not cause to shift the domestic production mix towards more capital-intensive one.

“Nonhomothetic Tastes and Missing Trade of Factor Services”　(under review)

(with James Cassing)

The recent literature on the Heckscher-Ohlin-Vanek (HOV) model has concentrated on the production side, particularly the unrealistic assumptions of identical techniques and factor price equalization. However, less is known about the demand side. In this paper, we study the assumption of identical and homothetic preferences as a cause of the empirical failures in the HOV prediction. While the relaxation in identical production techniques is still crucial to predict the direction of factor trade, nonhomothetic tastes are shown to play an important role in explaining why factor trade is “missing” in the sense of Trefler (1995) relative to the HOV prediction.

“International Differences in Emissions Intensity and Emissions Content of Global Trade”　(under review)

(with Stratford Douglas)

Understanding international differences in the emissions intensity of trade and production is essential to understanding the effects of greenhouse gas limitation policies. We develop data on emissions from 48 industrial sectors in 32 countries and estimate the CO2 emissions intensity of production and trade. We find no evidence that developing countries specialize in emissions-intensive sectors; instead, emissions intensities differ systematically across countries because of differences in production techniques. Northern and Western European countries have the lowest emissions-intensity, while Southern and Eastern European countries and China have the highest emissions-intensity. Developed countries such as Japan and the United States whose trading partners are mostly developing countries import the most emissions.