Study on International Trade and Firms

2009 - 2010

Recently there have been many theoretical analyses of whether high firm productivity promotes exports and foreign direct investment (FDI), and the global trend in research is to incorporate heterogeneity among firms in the analysis of international trade. However, there has been insufficient research on Japanese firms in respect to this issue. Deepening research in this field will make it possible for Japanese research groups to make international contributions to empirical research on this new trade theory as U.S. and European research groups have done. In addition, Japanese exports and FDI are very significant for maintaining economic growth and income levels. Therefore, the goal of this research project is to further new research and draw out the policy implications through an analysis of trade, overseas investment, and local production by Japanese firms using firm-level data and based on the latest results of theoretical and empirical research that focuses on the heterogeneity among firms.

In FY2010, we will conduct research on various topics including the impact that firm heterogeneity has on international trade, factors that determine exports, FDI, R&D activities at the firm level, and the relationship between international trade and labor markets, in particular the impact of international trade on regular and non-regular employment.

2008

Melitz (2003), Helpman et al. (2004) and others have theoretically established that high corporate productivity promotes participation in export and foreign direct investment. In more recent years, Bernard and Jensen (1995, 1999), Bernard et al. (2007) and others have examined the empirical validity of this theory using data from U.S. firms. Mayer and Ottaviano (2007) have conducted comprehensive research on European firms and have helped clarify the relation between corporate productivity and exports and foreign direct investment. The incorporation of corporate heterogeneity in the analysis of international trade constitutes a global trend in research.

While empirical studies of Japanese firms have been undertaken by Head and Ries (2001, 2003), Kiyota and Urata (2005), Tomiura (2007) and others, it cannot be said that sufficient work has been done in this area. The discussion paper entitled, "The Internationalization of Japanese Firms: New Findings based on Firm-Level Data" (WAKASUGI Ryuhei, TODO Yasuyuki, SATO Hitoshi, NISHIOKA Shuichiro, MATSUURA Toshiyuki, ITO Banri, TANAKA Ayumu) represents a comprehensive study in this field. While statistical data have been carefully examined, in-depth empirical analysis and consideration remain to be undertaken. Progress in this research field provides us as a Japanese research group corresponding to the U.S. and European groups with an opportunity to contribute to the international development of new trade theories and empirical studies.

Exports and foreign direct investment by Japanese firms play a highly significant role in economic growth and maintaining income levels. This project draws on the latest results of theoretical studies that suggest that firms are actually heterogeneous and not homogeneous as previously assumed to undertake a thorough analysis of the trade, overseas investment and overseas production activities of Japanese firms with the aim of identifying new ramifications for industrial policies.

September 2, 2008 - March 31, 2011