Japan Project Meeting

July 30-31, 2015
Shiro Armstrong, Australian National University; Charles Horioka, University of the Philippines and NBER; Takeo Hoshi, Stanford University and NBER; Tsutomu Watanabe, University of Tokyo; and David Weinstein, Columbia University and NBER, Organizers

Sebastian Heise, Yale University; Justin R. Pierce, Federal Reserve Board; Georg Schaur, University of Tennessee; and Peter K. Schott, Yale University and NBER

"American" vs "Japanese" Procurement: Theory and Evidence from Transaction-Level Trade Data

Heise, Pierce, Schaur, and Schott show theoretically how trade policy conducive to the emergence of long-term relationships between domestic buyers and foreign sellers can lead to the adoption of "Japanese"-style procurement practices, in which buyers ensure the provision of high-quality goods via long-run, just-in-time relationships. Consistent with the predictions of the model, the researchers find that a change in U.S. trade policy eliminating the annual threat of a trade war with China coincides with a shift towards smaller, more frequent shipments between U.S. importers and Chinese exporters vis-a-vis other U.S. trading partners. To the extent that this shift lowers inventory and procurement costs, the results highlight a new source of efficiency gains from trade policies that facilitate the formation of long-term buyer-seller relationships.

Yukiko Asai, University of Tokyo; Ryo Kambayashi, Hitotsubashi University; and Takao Kato, Colgate University

Careers of Married Women and the Nature of Husbands' Work: Evidence from Japan

In this paper, Asai, Kambayashi, and Kato provide fresh insight and evidence on the gender gap in promotion in the workplace. The researchers' use of the Japanese data is motivated by Japan's unusually large gender gap in the labor market in spite of the rapidly narrowing gender gap in educational attainment, and the present policy priority on enhancing career development of Japanese women. The multinomial logit estimates as well as the cohort analysis using the Employment Status Survey (a large representative repeated cross-section data) show consistently that when her husband is not in the rat race promotion tournament, the married woman is less likely to stay home as a full-time homemaker and more likely to work. However, the married woman's increased labor market participation as a result of her husband's exit from his rat race takes the form of work with limited scope for career advancement (e.g., non-standard employment such as part-time, and fixed-term contract work). The researchers find no evidence that the husband's exit from the rat race will result in an increase in her wife's odds of pursuing her own career advancement. In contrast, a fall in the payoff from her husband winning the rat race (the size of the winning prize) will result in an increase in the wife's odds of pursuing her own career. To overcome the limitations of the cross-section analysis such as the selection issue caused by assortative mating, the authors further conduct an additional analysis of panel data (the Labor Force Survey). The panel data analysis confirms that the husband's exit from his rat race will lead to a decrease (rather than an increase) in her odds of pursuing her career job with promotion prospect and an increase in her odds of switching to non-career jobs. The finding is consistent with the theory of joint consumption of household public goods and synchronization of leisure-work choice between the husband and the wife. These findings imply that without significant changes in the structure of Japan's well-established internal labor markets, simply making married men work fewer hours may not help Japanese policy makers achieve their current ambitious policy goal of "increasing the share of women in leadership positions to at least 30% by 2020 in all fields in society."

Nobuko Nagase, Ochanomizu University

The Effect of Family Friendly Regulation on Fertility: Evidence from Japan Using Natural Experiments

Low fertility in Japan is a major policy focus. Many policies, such as an increase in replacement allowances during parental leave, have been rolled out with little evidence that they have had any effect on fertility nor on labor supply during the 1990s and early 2000s. In this study, Nagase assesses the impact on childbirth and labor supply of regulations designed to promote a family-friendly work culture from the mid-2000s. The causal effects are identified by investigating two reform policies targeted at two different sized firms. The paper contributes to the literature on the effect of laws that impact changing organizational culture in a society where both gender and organizational norms are strong. The short-hour option reform significantly increased childbirth in working women who had been childless. Birth intent itself increased among childless women at the treated firms. At treated firms, women were more likely to take full-time permanent employment at reduced hours following their first childbirth. The policy was not significant for the second or the third births.

Christina Atanasova, Simon Fraser University, and Jess Diamond, Hitotsubashi University

Japan's Diversification Discount

This paper uses data for over 1,900 Japanese firms for the period 1999 to 2013 to examine the net costs and benefits of corporate diversification. Previous studies have documented a significant negative effect for Japan, i.e. a diversification discount, but Atanasova and Diamond show that there is large variation with many diversified firms actually trading at a premium relative to a theoretical portfolio of single segment firms. The researchers find that for firms with strong corporate governance, firm values are high and there is an efficient fund transfers from low- to high-productivity divisions. Only when corporate governance is weak, diversified firm values are low consistent with capital misallocation where funds are transferred from high-to low-productivity divisions.

William N. Goetzmann, Yale University and NBER; Yasushi Hamao, University of Southern California; and Hidenori Takahashi, Kobe University

Selective Disclosure: The Case of Nikkei Preview Articles

Nihon Keizai Shinbun (Nikkei for short) is a leading Japanese daily newspaper specializing in economy and business. It is also the largest vendor of Japanese financial and economic databases. During earnings announcement season, the Nikkei morning edition often publishes "preview" articles that are about companies' sales and earnings. However, these pre-date the actual company announcements, and forecast more accurately the actual results than the existing forecasts, making the Nikkei forecasts value-relevant information. Goetzmann, Hamao, and Takahashi identify 2,835 preview articles in the newspaper from 2000 to 2010. They examine the circumstances under which these preview articles are written and the impact they have on the market. The authors' findings show that stock price reacts positively to positive news but it does not react negatively to negative news. The market reacts to the information even before the preview articles are printed, suggesting some leakage of the information to market participants. The costs and benefits (or incentives) for companies, Nikkei, and investors are investigated using changes in returns and information content around the events. The researchers find a positive correlation between previewing and positive news sentiment.

Koichiro Ito, University of Chicago and NBER, and James M. Sallee, University of California, Berkeley and NBER

The Economics of Attribute-Based Regulation: Theory and Evidence from Fuel-Economy Standards (NBER Working Paper No. 20500)

Ito and Sallee develop a theoretical framework to study "attribute-based regulations," under which regulatory compliance depends upon a secondary attribute that is not the intended target of the regulation. The authors' theory characterizes the distortionary costs and potential benefits of attribute basing. To test their theoretical predictions, they exploit quasi-experiments in Japanese fuel economy regulations, under which fuel-economy targets are step functions of vehicle weight. Using bunching analysis, the researchers identify large distortions in vehicle weight. They then develop a method that leverages double-notched policies to conduct welfare analysis. The authors evaluate policy alternatives and quantify the important welfare trade-offs created by attribute-based policies.

Chie Hanaoka, Kyoto Sangyo University; Hitoshi Shigeoka, Simon Fraser University and NBER; and Yasutora Watanabe, Hong Kong University of Science and Technology

Do Risk Preferences Change? Evidence from Panel Data before and after the Great East Japan Earthquake

Hanaoka, Shigeoka, and Watanabe investigate whether individuals' risk preferences change after experiencing a natural disaster — specifically, the Great East Japan Earthquake in 2011. The novelty of the authors' study is that they use panels of nationally representative surveys, and thus, they can track the changes in risk preferences of the same individuals. The researchers find that people who experienced greater intensity of the earthquake become more risk tolerant. Interestingly, all the results are driven by men. Furthermore, these men gamble and drink more. Finally, the researchers compare the estimates from cross-sectional and panel specifications, demonstrating that the cross-sectional estimate may be biased due to unobserved heterogeneity.

Arito Ono, Chuo University; Daisuke Miyakawa, Hitotsubashi University; Kaoru Hosono, Gakushuin University; Hirofumi Uchida, Wakayama University; Taisuke Uchino, Daito Bunka University; and Iichiro Uesugi, Hitotsubashi University

Transaction Partners and Firm Relocation Choice: Evidence from the Tohoku Earthquake

Using a unique firm-level data set, Ono, Miyakawa, Hosono, Uchida, Uchino, and Uesugi examine whether and how the presence of incumbent transaction partners, i.e., suppliers, customers, and lender banks, affects firms' choice of where to relocate. The researchers focus on those firms that were forced to relocate their headquarters because of the severe damage inflicted by the Tohoku Earthquake. They find that firms tended to move to areas where their customers were located, but not to areas where their suppliers were located. The authors also find that firms tended to move to areas where the bank branches that they had transacted with were located. Furthermore, the researchers find that the positive effect of the presence of incumbent customers and banks on the probability of the firms' relocations diminished if the customers and the bank branches were also damaged by the earthquake. On balance, these results suggest that the presence of healthy transaction partners is an important factor in the firms' choice of location.

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