Building a GCE Model for East Asia that Introduces Economies of Scale

2007-2008

The rapid pace of economic development and integration in East Asia has had a major impact on the entire Japanese economy as well as its local economies. The purpose of this project is to develop an applied general equilibrium model for both the national and local levels, and to quantitatively evaluate how economic development is affecting local economies in Japan and other countries. In the model to be developed, we will put emphasis on analyzing the changes in industrial structure that occur in the context of economic integration, while taking into account the economies of scale and imperfect competition. Particular attention will be paid to the analysis of the increase in regional disparities resulting from decentralization policies being pursued in various countries. This project ultimately aims to provide a highly transparent framework for facilitating consensus-building on the national and local levels. For this purpose, the project will examine how policy responses in individual countries affect the economic structure of the East Asian region in the context of a dual structure of national and local economies. This examination will use welfare criteria based on the perspective of local economies.

2006

The advance of the economic globalization, the geographical concentration of economic activity and the agglomeration of industry are now driving forces in the world. In particular, the remarkable development of the East Asian economies and the trend toward economic integration are having a major impact on the Japanese economy. In our research we will develop an applied general equilibrium model for East Asia and will prepare a base for the quantitative evaluation of what changes there will be in the positioning of each nation's economy, including Japan's, in the course of economic integration. This model will focus on trends in industrial agglomerations that arise as a result of economic integration and will explicitly incorporate economies of scale, also making imperfect competition a target of analysis. It will provide a highly transparent framework that will promote the reaching of agreement by clarifying how each country's political responses during negotiation of economic integration could affect the economic structure of East Asia, and how that would change the welfare of each country.

Until June 30, 2008