Multinational Firms and the Globalization of Developing Economies
Interim Report
Edited by TANAKA Kiyoyasu
Published in March 2013
1.
Heterogeneous Multinational Firms and Investment Liberalization in Developing Economies (302KB) / Shawn ARITA, Kiyoyasu TANAKA
As developing economies have increasingly implemented investment liberalization to attract foreign investment, its impact on multinational firms is a crucial policy question. This paper seeks to quantify the response of individual multinational firms to a reduction in investment costs in developing countries. Calibrating the firm-heterogeneity model of Eaton, Kortum, and Kramarz (2011) to match micro-level data on Japanese multinational firms, we use the calibrated model to conduct a series of counterfactual policy experiments that reduce fixed or variable costs of foreign production. We find that the greater level of investment liberalization may produce larger welfare gains for the developing economies. In terms of the extensive and intensive margins, the policy reforms tend to induce more productive foreign firms to expand their local production to the larger extent. These results suggest a policy implication for investment targeting at the firm-level.
2.
Agglomeration Effects in Cambodia (939KB) / Yoshihiro HASHIGUCHI, Kiyoyasu TANAKA
We consider a formal framework to shed light on agglomeration effects in Cambodia. Using the new census dataset on all the Cambodia establishments in 2011, we describe the current patterns of industrial agglomeration in manufacturing and wholesale/retail sectors. As these sectors clearly exhibit a spatial concentration of economic activity with varying degrees across sectors, the descriptive analysis provides a motivation for investigating whether the observed patterns of agglomeration would yield productivity gains. To make a formal assessment, we develop a Bayesian spatial approach and address econometric issues such as spatial autocorrelation between nearby regions and endogeneity of agglomeration. Simulation analysis of our spatial model shows that if strong instruments are available, the framework enables us to identify the impact of agglomeration economies with precision. Thus, our next step is to find a set of plausible instruments to conduct an econometric analysis and derive policy implications for Cambodia.
3.
Does Aid in Roads Attract Foreign or Domestic Firms? Evidence from Cambodia (266KB) / Kiyoyasu Tanaka, Kenmei Tsubota
Less developed countries have received substantial foreign aid in transport infrastructure, making its quantitative assessment important. This paper employs the first comprehensive census on all the business establishments in Cambodia for 2011 and examines the effect of aid in road infrastructure on the location of foreign and domestic firms. Estimating a negative binomial model, we find that aid disbursements in roads have little influence on the number of foreign firms across communes. While aid has a significantly positive effect on that of domestic firms, its economic impact is relatively smaller than other determinants such as population size, electricity access, and labor supply. Thus, there appears to be a limited impact of aid in roads on the location of economic activity in Cambodia.