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This paper examines how unionization affects economic growth through its impact on industry concentration in a two-country model of international trade and endogenous productivity growth. Knowledge spillovers link firm-level productivity in innovation with geographic patterns of industry ensuring a faster rate of output when industry is rel?atively concentrated in the country with the greater labor supply. We show that stronger bargaining power in the relatively large country increases the rate of output growth when labor unions are employment-oriented, but decreases the rate of growth when unions are wage-oriented. We then calibrate the model using labor market data for the United States and the United Kingdom and study the effects of falling union bargaining power on industry location patterns, output growth, and national welfare.

This paper uses a dynamic general equilibrium model to examine whether financial innovations destabilize an economy. Applying a neoclassical production function, we demonstrate that as financial frictions are mitigated, the economy loses stability and a ip bifurcation occurs at a certain level of financial frictions under an empirically plausible elasticity of substitution between capital and labor. Furthermore, the amplitude of uctuations increases as financial frictions are mitigated and is maximized when the financial market approaches perfection. These outcomes imply that financial innovations are likely to destabilize an economy.

This paper considers how increasing longevity and declining birth rates affect market entry and endogenous productivity growth in a two-country model of trade. In each country, the demographic transition to an older population induces a contraction in the labor force through a decline in the working-age population. Firm-level investment in process innovation generates productivity growth, and with imperfect knowledge diffusion the country with the larger labor force has a greater share of firms with higher productivity levels. In this framework, population aging reduces a country’s labor supply, share of industry, and relative productivity. If the country with the smaller labor force experiences population aging, knowledge spillovers improve and the rate of productivity growth rises, as the level of market entry falls. Alternatively, population aging in the country with the larger labor force weakens knowledge spillovers and lowers the rate of productivity growth, but has an ambiguous affect on market entry. We show that the effects of population aging may be reversed by extending retirement age, and consider the welfare implications for demographic transition and retirement age extension arising in our framework through a quantitative analysis based on population data for the United States and Western Europe.

A tractable model with infinitely lived agents is constructed for the examination of bubbles and unemployment. It is demonstrated that the presence of bubbles stimulates capital accumulation and reduces unemployment. The presence of bubbles also changes the effects of government policies that target unemployment and welfare conditions in the labor market. The main findings are as follows: (i) the presence of bubbles is more beneficial to an economy with severe credit constraints; (ii) the presence of bubbles mitigates the negative effects of taxation and unemployment benefits on unemployment and welfare; and (iii) these mitigation eects decrease as credit constraints are relaxed.

We study the effects of import competition on industry locations patterns in a small open economy with two regions. Domestic productivity growth converges to the international rate through firm-level investment in process innovation. With firms locating production and innovation in their lowest cost locations, the concentration of industry in the larger region is linked with firm-level innovation through an import competition effect that is increasing in the market share of imported goods and the productivity differential of domestic firms with the rest of the world. We show that increased import competition, through either a larger number of imported goods or a faster international rate of productivity growth, leads to greater industry concentration by reducing domestic market entry and decreasing the relative productivity of domestic firms. We also consider the implications of improved regional and international economic integration.

We develop an aggregate demand analysis of a small open economy based on all agents’ dynamic optimization. Murota and Ono (2015) present a simple Keynesian cross analysis with dynamic optimization. This paper extends it to a small-country setting with two factors and two commodities, of which the structure is as simple as the conventional Keynesian cross analysis. We apply the model to examine the effects of changes in various parameters, such as the terms of trade, foreign asset holdings and government purchases, on aggregate demand. They are quite different from those under full employment and those of the Mundell-Fleming model.

In recent years firms have started to offshore their innovation activities to emerging economies. This paper investigates the implications of innovation offshoring for productivity growth in a two-country framework that features a tension between access to technical knowledge and low-cost high-skilled labor in the innovation location decision. Industry and innovation tend to concentrate in the asset-wealthy country when trade costs are relatively high. A positive relationship between innovation costs and industry concentration then ensures that improved international knowledge diffusion coincides with an increase in net offshoring flows in innovation from the asset-wealthy country to the asset-poor country, and potentially with faster productivity growth.

This paper constructs a two-country model of international trade to study how labor market frictions affect industry location patterns, unemployment rates, and fully endogenous productivity growth. We show that when the larger country offers subsidies to labor search costs or reduces unemployment benefits, the domestic unemployment rate falls, causing greater industry concentration and faster productivity growth, but higher unemployment for the smaller country. When similar labor market policies are implemented in the smaller country, however, the resulting fall in domestic unemployment leads to lower industry concentration and slower productivity growth, while lowering unemployment in the larger country.

This paper considers how increasing longevity and declining birth rates affect market entry and endogenous productivity growth in a two-country model of trade. In each country, the demographic transition to an older population induces a contraction in the labor force through a decline in the working-age population. Firm-level investment in process innovation generates productivity growth, and with imperfect knowledge diffusion the country with the larger labor force has a greater share of firms with higher productivity levels. In this framework, population aging reduces a country's labor supply, share of industry, and relative productivity. If the country with the smaller labor force experiences population aging, knowledge spillovers improve and the rate of productivity growth rises, as the level of market entry falls. Alternatively, population aging in the country with the larger labor force weakens knowledge spillovers and lowers the rate of productivity growth, but has an ambiguous affect on market entry. We show that the effects of population aging may be reversed by extending retirement age, and consider the welfare implications for demographic transition and retirement age extension arising in our framework through a quantitative analysis based on population data for the United States and Western Europe.

In this globalizing world, chances for Japanese people to interact with people in other countries have been increasing. Whether they be from English speaking countries or countries where English is not a first language, the medium of these interactions is mostly English, given the widely-accepted status of the language as a common language (lingua franca) in the world. A key issue here is how Japanese people perceive and comprehend non-native varieties of English. Often, non-native English contains varying degrees of foreign accents, and these accents may be a potential obstacle to the successful comprehension of what the interlocutor says, potentially leading to the failure of successful communication. To illuminate what kinds of characteristics in the accented speeches affect L2 speech perception or comprehension, we conducted a truth-value judgment experiment with Japanese learners of L2 English listening to four varieties of L2 English utterances (Chinese, Japanese, Korean and Thai). We measured time taken to make a truth-value judgment, which is assumed to reflect processing difficulty in comprehending a given accented speech, as well as the accuracy score for the judgment and a subjective evaluation of Japanese-English-likeness. The results indicated that the Japanese listeners found Japanese and Korean versions of English utterances easier to understand in comparison with the Chinese and Thai varieties. Close observations of the utterances suggest that the present Japanese and Korean speakers had similarities in segmental and suprasegmental features, which might have led to a facilitation effect for Japanese listeners in understanding these two varieties, while the listeners possibly had difficulty with the Chinese and Thai varieties due to the influence of differentL 1 rhythmic categories.

In recent years firms have started to offshore their innovation activities to emerging economies. This paper investigates the implications of innovation offshoring for productivity growth in a two-country framework that features a tension between access to technical knowledge and low-cost high-skilled labor in the innovation location decision. Industry and innovation tend to concentrate in the asset-wealthy country when trade costs are relatively high. A positive relationship between innovation costs and industry concentration then ensures that improved international knowledge diffusion coincides with an increase in net offshoring flows in innovation from the asset-wealthy country to the asset-poor country, and potentially with faster productivity growth.