Today, the information technology (IT) is making its dynamic progress, sometimes called IT revolution, involving every sphere of the world. The key word of this move is ‘digital’, i. e., to convert any and all informa tion into the binary system. Our way of thinking, on the other hand, has been deeply accustomed to handle the phenomena by analogous physical attributes. This change of the analogous structure to the digital one enables us to create an entirely new and ‘analogous attribute free’ world called the ‘virtua’ and/or ‘cyber’ space, which forces us to rebuild our concepts in a totally different logic. This includes the economic theories and the interna tional economic theories are no exception. Free trade theories, foreign direct investment theories, international monetary theories are all categorized as those handling the economic phenomena analogously. A new theory for the ‘digital’ goods needs to be developed. This paper examines some theoretical possibilities by presenting a conceptual model called ‘the catastrophe product life cycle.’
We construct a simple overlapping-generations model of international trade with a durable consumption good. We show that the dynamics of the market is described by a nonlinear second-order difference equation; there exists a unique autarkic stationary equilibrium; and it is locally conditionally stable. Further we show that there exists a homothetic fictitious social utility function that characterizes the stationary equilibrium as a “tangent point” of an indifference curve and the production possibility frontier. With this, even in the presence of the consumption durability, we can easily show the basic predictions on trade patterns due to some well-known static trade models such as the Heckscher-Ohlin-Samuelson model and the specific-factors model remain valid at the stationary equilibrium. In addition, we show that a country with a higher rate of time preference tends to have the comparative advantage on the durable good.
We estimate the impacts of overseas production of Japanese manufacturing firms on the domestic productivity (Total Factor Productivity). In this analysis, we use two approaches. First, using aggregated survey data, we estimate TFP of Japanese head offices and the whole Japanese manufacturing firms. And estimate the rate of return of domestic R&D Investments on those TFP separately. Secondly, using macro data of Japanese electric machinery industry, we decompose the TFP growth into three factors, namely (1) shift in cost function, (2) effect of overseas production in Asia and (3) effect of overseas production in North America based on the estimates of trans-log type macro price function. We found that the overseas production in Asia after the latter half of 1980s improved the domestic productivity of electric machinery industry. However the overseas production in North America did not contribute to the productivity growth of electric machinery industry.
This paper introduces the role of multinational corporations (MNC) into the Product Cycle with qualityupgradingmodel and examines how technology diffusion in developing countries is affected through the activities of MNC. We discuss two sides of MNC: first, as conductors of technology from developed into developing countries, and second, as producers who need a certain portion of inputs from both countries, called “local content ratio”, in order to produce goods. In this model, we show that higher local content ratio of MNC may either decrease technology diffusion into developing countries, or widen wage disparity between both countries. But there was no simultaneous increase in technology diffusion and decline in wage disparity.