We examine the effects of fiscal policy on employment in Japan by considering both gender and regional differences. Our empirical results demonstrate that regardless of specification, government consumption is effective for employment recovery in many regions. Second, it especially benefits the Southern Kanto and Kansai regions, as well as their neighboring regions. Finally, we show that government consumption shocks have larger effects on female workers during recession periods.
This paper explores the feasibility of Green Transformation (GX) from a public finance perspective. Japan is the first country to issue the government-sponsored transition bonds, the GX Economy Transition Bonds. The bonds are designed to subsidize large-scale GX investments, with the future carbon pricing (CP) serving as the source of repayment. We investigate sustainability of the GX Economy Transition Bonds using the two-sector endogenous growth model that consists of dirty and clean sectors. Our simulation result shows that the optimal policy, which creates a virtuous cycle of economic and environmental progress, is unsustainable from a public finance perspective. Increasing the carbon tax rate would not improve the fiscal condition because of the Laffer curve. Decreasing the subsidy rate would improve the fiscal condition only at the cost of greater global warming and lower aggregate output. This implies that the government is facing a trilemma among decarbonization, economic growth, and fiscal sustainability unless it finances the subsidies through other fiscal sources.
This study investigates how cross-border acquisitions shape the R&D activities of acquired firms in Japan. Comparing foreign and domestic acquisitions side by side, we find that foreign acquisitions tend to reduce R&D expenditure of acquired firms, while domestic acquisitions show no such effect. We also find that post-acquisition R&D reallocation differs sharply by acquirer origin and industry relatedness. Overall, these results suggest that the post-acquisition R&D outcomes vary depending on acquirer attributes and post-acquisition integration strategies.
This paper examines whether geopolitical risk (GPR) affects the occurrence of extreme capital flow episodes. Using a quarterly panel of 57 economies from 1986Q1 to 2023Q4, we estimate complementary log-log models for four episode types: surge, stop, flight, and retrenchment. We compare the effects of global and country-specific GPR and examine heterogeneity across advanced and emerging economies. Global GPR shows little systematic association with extreme capital flow episodes. By contrast, country-specific GPR is significantly associated with extreme capital flow episodes in emerging economies: higher country-specific GPR lowers the probability of surge episodes and raises the probabilities of stop, flight, and retrenchment episodes. Flow-type decompositions indicate that banking flows mainly drive flight episodes, direct investment drives stop episodes, and banking, debt, and equity flows contribute to retrenchment episodes. The results further suggest that country-specific GPR has become a more important driver of extreme capital flow episodes in emerging economies after the global financial crisis.
This paper develops a continuous-time model of a regional economy with an undocumented immigrant population, where unemployment stems from search frictions and criminal activity arises from random opportunities encountered by the unemployed. Featuring a dual wage-setting mechanism-mandated minimum wages for natives and negotiated wages for immigrants-the model shows that increasing the deportation of illegal immigrants with criminal records consistently reduces regional unemployment. However, the impact on crime is conditional: deportation reduces criminal activity if employing native labor is more profitable than employing immigrants. Similarly, while raising the minimum wage does not affect unemployment, it serves to reduce crime under the same profitability condition. Conversely, if employing immigrants is more profitable for firms, these policies may backfire, potentially leading to an increase in immigrant-driven crime.
This study examines the effects of venture capital (VC) investment on the performance of new firms according to investor type (i.e., independent and captive VCs). In particular, the study explores whether the type of new firms, based on attributes such as firm age and size, moderates the effects of VC investment. To do this, we adopt a matching technique and estimate the average treatment effect of receiving a first-time VC investment on new firm performance (growth and productivity). The results show that the positive effects of independent VC investment are more pronounced for older and larger firms, whereas those of captive VC investment are more pronounced for younger and smaller firms.
This paper investigates the effectiveness of forward guidance in Japan using a Bayesian structural vector autoregression model with instrumental variables (BVAR-IV model) identified by high-frequency monetary policy surprises. While existing studies primarily focus on identifying monetary policy shocks, we emphasize the role of financial market transmission mechanisms in shaping the macroeconomic effects of forward guidance. We show that monetary policy shocks identified through instrumental variables are stable across model specifications. However, the estimated responses of real economic variables differ markedly depending on whether financial market variables are incorporated into the VAR system. Once asset prices, bond markets, and exchange rates are explicitly modeled, forward guidance exhibits statistically and economically significant effects on real activity that are substantially larger and more persistent than those obtained from small-scale VAR models. These findings suggest that financial markets play an important role in transmitting and amplifying the effects of forward guidance. More generally, our results highlight that the effectiveness of forward guidance can be underestimated unless financial market transmission mechanisms are properly accounted for.
Cross-country differences in education quality have long been studied for their implications at both individual and societal levels, with growing emphasis on the role of quality in realizing the economic returns to education. This study develops a novel cross-country measure of higher education quality by leveraging the relationship between institution-level indicators—such as faculty-to-student ratios and global university rankings—and the earnings of college graduates employed overseas. Building on this relationship, a country-level index of higher education quality is constructed that captures cross-country variation in institutional characteristics, weighted by their estimated effects on graduate earnings, for 98 countries. To assess the macroeconomic relevance of higher education quality, cross-country regressions of gross domestic product per worker, resident patenting activity, and research and development expenditures are estimated. To address potential endogeneity, an instrumental variable strategy is employed that exploits geographic proximity to global academic hubs. The results suggest a substantial and economically meaningful relationship between higher education quality and all three outcomes, highlighting its potential role in shaping long-run economic development and innovation capacity.
This study investigated the effects of bullying victimization on cognitive, school engagement, and friendship outcomes using panel data collected from elementary school students in a Japanese city. Employing a value-added model that controls for prior outcomes, our findings revealed that bullying victimization significantly impairs both cognitive and school engagement and weakens friendship formation. Furthermore, a high prevalence of bullying victimization within the classroom was found to negatively impact cognitive outcomes in subsequent years. These findings underscore the importance of effective school bullying prevention in fostering human and social capital among school-aged children.
This study investigates the effectiveness of Korea's fiscal policy for economic stabilization, focusing on state dependency. Using the Auerbach and Gorodnichenko (2013)’s model, the analysis addresses short-term government expenditure data by components and identifies forecast errors to capture unexpected expenditure changes. Results show that fiscal policy is more effective in slack, with a higher multiplier effect in slack than in boom. Unexpected government expenditure shocks are more impactful than anticipated changes. Among components, government investment expenditure yields the highest multiplier effect, with direct government purchases proving the most effective, surpassing unity in impact compared to other types of expenditure.
This study revisits the impact of the servicification of Japanese manufacturing firms on their performance in the export market using a Japanese firm-level panel data set from 2009 to 2019. We constructed two measures of firm-level servicification: in-house service production and bought-in service input, which refers to service purchased from external providers. We then examine the impact of both types of servicification on corporate performance in the export market, as measured by the global value chain participation dummy and export intensity. Estimating the correlated random effects model, which allows us to control for unobserved individual fixed effects, we find that bought-in service input, especially service outsourcing, significantly improves global value chain participation and export intensity, and that this effect is greater for high-tech industries.
This study explores the impact of sample selection bias on estimates of gender wage gaps among young workers in South Korea. It uses data from the Korean Labor and Income Panel Study (KLIPS) and applies two wage imputation methods to correct for selection into full-time, regular employment. Specifically, it estimates the wage offers of those not in full employment using wages from proximate years and a semi-parametric reweighting method. The findings show that ignoring sample selection bias causes wage offers to be overestimated, particularly for women, as those with lower wage offers are more likely to opt out full employment. Consequently, selection adjustments increase wage gaps in both 2001 and 2017. Positive selection weakens for women during this period which is associated with changes in education and marriage. Therefore, adjustments increase gaps more in 2001 than in 2017, leading to larger decreases in the wage gaps over time. This implies that the relative progress in labor market opportunities for women is larger than previously estimated. Finally, unadjusted gaps suggest gender disparities were largest in low-paid positions in 2001 but high-paid positions 2017, whereas adjusted gaps suggest they were largest in medium-paid positions in both years. Overall, the findings highlight the importance of accounting for sample selection bias when assessing gender wage disparities.
This study examines how the COVID-19 pandemic deteriorated the occupational mismatch between job seekers and vacancies in the Japanese labor market. We particularly investigate how occupational vulnerability and labor market segmentation by employment type (full-time versus part-time) affected mismatch dynamics during the pandemic. We estimate the mismatch indices across occupations by vulnerability and employment type using the method developed by S,ahin et al. (2014). We find that the pandemic induced mismatch across occupations with a high risk of infection and occupations in which it is easy to work remotely for both full- and part-time workers. Furthermore, mismatch across occupations in which it is particularly difficult to work remotely increased for full-time workers.
Over the last several decades, many developed countries have increased patient cost-sharing to contain healthcare expenditures. Some influential studies, including the RAND Health Insurance Experiment, suggest that increasing patient cost-sharing reduces unnecessary medical care by mitigating ex-post moral hazard. However, most existing studies in this field focus on short-run effects, in which the health status of the insured and provider behaviors remain unchanged. In this study, we analyze the medium-term impact of the 2003 coinsurance rate increase on inpatient care utilization by using public hospital data in Japan covering a 12-year period. Difference-in-differences and event study analyses robustly showed that the number of inpatients decreased a few years after the 2003 reforms. However, inpatient costs per patient day began to increase after four years, mainly due to increased medical resources. Eventually, despite the initial reduction in the number of inpatients, we found that the effects on total inpatient costs were negligible in the medium run. These findings indicate that many existing studies may overestimate the cost-containment effects of patient cost-sharing in the medium- and long-term.
This paper investigates whether introducing advanced technologies will affect the impact of population aging on productivity. We examine the interactions between age-skill labor groups and technical capital represented by ICT and industrial robots in 12 OECD countries from 2008 to 2020. Using sector-level data, we find that a higher ICT intensity enhances relative labor productivity in industries employing a large share of low-skilled older workers, while robots exhibit complementarities with high-skilled older workers. Moreover, when ICT and robots are jointly adopted, the relative productivity differences across age-skilled groups are shrinked, particularly narrowing the gap between workers of the same age group but with different skill levels. The effects, however, are highly heterogeneous across countries and industries. In countries with high population aging and widespread robot use, the interactions between technological capital and labor differ markedly. Furthermore, robots tend to exhibit stronger complementarities with workers in capital-intensive industries, while ICT shows complementary effects with older workers across both skill groups in labor-intensive industries.
Individuals can engage in sustainable economic activities both as investors and consumers. To examine their dual roles in promoting sustainability, we analyze preferences for sustainable investment compared to green consumption through a survey of Japanese individuals. We find no substantial difference in non-monetary motivations for sustainable activities, as the proportion of respondents choosing sustainable investments with low returns is comparable to that for green consumption with high price. Furthermore, environmental orientation has a common effect on both sustainable investment and green consumption. Specifically, individuals with high environmental orientation prefer sustainable investments with low returns and also green consumption at high product prices. However, environmental orientation has no significant effect on risky sustainable investments, indicating that strong pro-environmental awareness may not be sufficient to overcome the risks associated with investment activities.
The COVID-19 pandemic and the resulting falls in demand are severely affecting Asian households. At the same time, governments implemented aid programs to support households and businesses. To better understand these impacts, we carried out two waves of interviews of households in seven ASEAN countries. The following factors contributed to declines in expenditure and the experience of financial difficulty: being in a lower-income group, lower education of household head, female household head, job loss, and location in a lockdown area. The amount of government aid received relative to pre-pandemic income was much higher for lower-income groups. We find a positive effect of government aid on reducing the experience of financial difficulty.
This study conducts a systematic analysis of the stock market reversal effect using four key indicators: high-to-price, price-to-high, low-to-price, and price-to-low. By applying these indicators to the Japanese stock market, this study evaluates their effectiveness in predicting reversals. The findings indicate that among the four indicators, price-to-low proves to be the most effective. In contrast, high-to-price, which was initially expected to be the strongest in capturing the momentum effect, does not perform as prominently as anticipated. This suggests that the reference price investors should consider may vary depending on market conditions and time periods. Moreover, the effectiveness of the price-to-low strategy becomes even more pronounced during periods of high volatility, highlighting its potential as a valuable investment approach in times of heightened market uncertainty.
