Yasusada Murata

Product diversity, taste heterogeneity, and geographic distribution of economic activities:: market vs. non-market interactions

Abstract There are two independent strands of literature on the geographic distribution of economic activities. One is the new economic geography that emphasizes product diversity, and the other is probabilistic migration that stresses taste heterogeneity in residential location. This article incorporates these two characteristics into a single framework, and analyzes how they affect the number and stability of equilibrium geographic structures. It shows that the home market effect due to market-mediated product diversity creates an agglomeration force, whereas idiosyncratic taste differences due to non-market interactions serve as a probabilistic immobile factor and induce a dispersion force. The tension between these opposite forces, together with the decline in transportation costs, yields different patterns of agglomeration and the associated changes in interregional wage differentials.

Localized Knowledge Spillovers and Patent Citations: A Distance-Based Approach

We develop a new distance-based test of localized knowledge spillovers that embeds the concept of control patents. Using microgeographic data, we identify localization distance for each technology class while allowing for spillovers across geographic units. We revisit the debate between Thompson and Fox-Kean (2005a, 2005b) and Henderson, Jaffe, and Trajtenberg (2005) on the existence of localized knowledge spillovers and find solid evidence supporting localization even when using finely grained controls. Unless biases induced by imperfect matching between citing and control patents due to unobserved heterogeneity are extremely large, our distance-based test detects localization for the majority of technology classes.

Rural-urban interdependence and industrialization

Abstract This paper presents a model of industrialization through rural–urban interdependence. It shows how an economy with a low cost share of industrial inputs in agricultural production and a low expenditure share of manufactured goods, together with a limited variety of industrial inputs, can be caught in a low development trap. By escaping from the trap the economy moves toward more roundabout methods of agricultural production, mass consumption of manufactured goods, and urbanization. The transition from the low development trap to industrialization is consistent with the historical evidence on Japan.

TRADE, WAGES, AND PRODUCTIVITY: TRADE, WAGES, AND PRODUCTIVITY

We develop a general equilibrium monopolistic competition model in which wages, productivity, consumption diversity, and markups respond to trade integration. We structurally estimate the model and simulate the impacts of removing all trade barriers generated by the Canada–U.S. border. Firm selection gets tougher by 8.09% in Canada and by 0.80% in the United States. Markups that consumers face, which are central to welfare, fall by up to 12.11% in Canadian provinces and by up to 2.82% in U.S. states. However, changes in markups measured at the firm level are ambiguous, thus providing a different piece of information.

On the Number and the Composition of Varieties

I propose a simple general equilibrium model with nonhomothetic preferences and productivity differences and analyse the number and the composition of varieties in consumption. I obtain the following three results. First, population and labour efficiency have different roles in the income elasticity of demand, thus having different impacts on the number of final goods. Second, given the number of final goods, the composition of varieties is determined by the relative importance of desirability and technological feasibility of each final good. Finally, the equilibrium number and composition of final goods may not necessarily be the same as the optimal ones. Copyright

Gains from trade and efficiency under monopolistic competition: a variable elasticity case

We present a general equilibrium model of monopolistic competition with variable demand elasticities and investigate the impact of free trade on welfare and efficiency. First, contrary to the constant elasticity case, in which all gains from trade are due to increasing product diversity, our model features gains from pro-competitive effects. Second, we prove that the market outcome is not efficient because too many firms operate at an inefficiently small scale. Last, we illustrate that free trade raises efficiency by reducing the gap between the equilibrium utility and the optimal utility.