Kiyoyasu Tanaka

Spatial Spillovers from Foreign Direct Investment: Evidence from the Yangtze River Delta in China

This paper examines the spatial externality from foreign direct investment on domestic firms. Using Chinese firm�?level data for 2004, and after accounting for an endogeneity problem, we find that foreign firms generate a significantly positive spillover effect on the regional productivity of domestic firms in similar counties and industries. Estimating a spatial�?autoregressive model, we further show that such local spillovers could transmit to domestic firms in other counties and industries through interactions among domestic firms. However, these spatial multiplier effects decline with distance, thereby reducing the foreign direct investment spillover effects for domestic firms in distant locations.

Shedding Light on the Shadow Economy: A Nighttime Light Approach

Abstract Measuring the shadow economy is inherently difficult, but critical for understanding economic development. Using census data on formal and informal sectors in Cambodia, we document that 96.6 per cent of non-farm establishments do not formally register with the government, and their sales accounted for 76.6 per cent of total sales in 2011. Estimating their past sales from changes in nighttime light for 1993–2010, we find that both formal and informal firms increased their estimated sales. The share of informal sales increased from 68.8 per cent in 1993 to 76.6 per cent in 2011, suggesting that the informal sector increased quantitatively in both absolute and relative terms over time.

Transport modal choice by multinational firms : firm-level evidence from Southeast Asia

We examine transport-mode decisions by multinational firms to shed light on the role of freight logistics in multinational activity. Using a firm-level survey in Southeast Asia, we show that foreign ownership has a significantly positive and quantitatively large impact on the likelihood that air/sea transportation is chosen relative to truck shipping. This result is robust to the shipping distance, cross-border freight, and transport infrastructure. Both foreign-owned exporters and importers also tend to use air/sea transportation. Thus, our analysis presents a new distinction between multinational and domestic firms in their decision over transport modes.

Firm Heterogeneity and FDI in Distribution Services

Distribution services play a large role in intermediating production and consumption across borders. Using firm-level data on Japanese multinationals in the wholesale and retail sectors, this paper examines foreign direct investment (FDI) decisions of distribution firms for local distribution services at the extensive and intensive margin. Consistent with the model of heterogeneous firms on multinational production, productive multinationals are more likely than less productive ones to enter a larger number of markets, penetrate less attractive markets, and generate larger sales per market. While these findings are consistent with previous evidence on manufacturing multinationals, there are some distinctive determinants of FDI in distribution services.

Does policy reform promote FDI in developing economies? a firm-level simulation approach

How do policy reforms for foreign investors in developing economies affect inward foreign direct investment? Using a firm heterogeneity model calibrated to match data on Japanese multinational firms, we simulate how multinationals respond to a decline in investment procedure days. We find that such policy reforms in investment procedures significantly increase the aggregate entries and sales of multinational firms in developing economies, with the more pronounced impact at the extensive margin than at the intensive margin. At the firm level, declining entry costs encourage more productive firms to invest in a wider range of markets although such impacts are modest for the most productive firms that already penetrate many markets. The impacts on foreign sales per multinational firm are less clear-cut in magnitude across productivity levels in part because falling entry costs directly increase multinational entry to developing economies, but only indirectly encourage their existing production in these markets.

Location Choice of Multinational Firms in CLMV Countries

In the present global era, in which firms choose to locate their plants beyond national borders, location characteristics become important for attracting multinational enterprises (MNEs). MNEs have distributed their overseas production plants all over the world and have formed international production/distribution networks. However, the distribution of their overseas affiliates around the world is not necessarily uniform. Only a limited number of locations succeed in attracting a large number of MNEs because MNEs base decisions on their location abroad by taking into consideration several location characteristics, such as market size, extent of infrastructure development, or existence of industrial concentration. As a result, the location choices of MNEs yield large differences in inward foreign direct investment (FDI) among locations. Such a gap might lead to a widening of the gap in economic development among locations, because the entry of MNEs is expected to give birth to various kinds of positive benefits, such as spillover effects, to the location. Therefore, it is crucially important to understand the detailed mechanics of the location of MNE overseas plants.

Economic Integration and Industrial Location in Laos: How Has Border Mattered?

After a nearly two centuries of struggle for independence and civil war, Laos1 became a politically integrated and independent state once again in 1975.2 However, Laos was and is still far from becoming a unified market. Major cities are separated not only by a mountainous landscape but also a poorly developed transportation infrastructure. A relatively small population living dispersedly over large areas and restriction of trade between provinces until the mid-1980s have made broadly defined transportation extremely high.3 Small urban areas could not sufficiently function as consumption centers even for agricultural products in nearby provinces. As a consequence, major cities bordering Thailand to the west, where the majority of Lao live, continue to depend more on agricultural products imported from more “industrialized Thailand” instead of subsistent agricultural neighborhoods.