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Why Has the Border Effect in the Japanese Machinery Sectors Declined?
The Role of Business Networks in East Asian-Machinery Trade
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| Kyoji Fukao and Tshihiro Okubo
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This paper analyzes the causes of the decline in Japan's border effect in four machinery industries (electrical, general, precision, and transportation machinery) by estimating gravity equations for Japan's international and interregional trade. In the estimation, we explicitly take account of firms' networks. We find that ownership relations usually enhance trade between two regions (countries); moreover, we find that we can explain 35% of the decline in Japan's border effect from 1980 to 1995 in the electrical machinery industry by the increase of international networks.
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