Working Paper: NBER ID: w5670
Authors: Fukunari Kimura; Robert E. Baldwin
Abstract: This paper applies the nationality-adjusted net sales and value added framework proposed in Baldwin and Kimura (1996) to Japan. Despite possibly large estimation errors due to statistical deficiencies, the framework is very useful for analyzing the relationship of the Japanese economy to the world economy. We find that Japan is special in the following four aspects. First, Japanese-owned firms have become increasingly dependent on the marketing activities of their foreign affiliates, rather than depending on cross-border exports by parent firms located in Japan. Second, the much smaller activities of Japanese affiliates of foreign firms (JAFF) relative to those of foreign affiliates of Japanese firms (FAJF) are apparent in terms of sales, value added, and employment, at both the macroeconomic and sectoral levels. Third, Japanese net sales to foreigners are consistently larger than cross-border net exports of Japan. Fourth, among the activities of FAJF, the importance of commercial FAJF is particularly large; these commercial FAJF handle a large portion of Japanese exports and imports. The paper concludes by discussing a number of statistical improvements required by the Japanese government in order to apply our analytical framework more rigorously.
Keywords: nationality-adjusted net sales; value added; foreign affiliates; Japan; international trade
JEL Codes: F23; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Japanese-owned firms' dependence on foreign affiliates (F23) | marketing activities of foreign affiliates (F23) |
| activities of Japanese affiliates of foreign firms (F23) | scale differences (F12) |
| Japanese net sales to foreigners (F10) | cross-border exports (F10) |
| presence of commercial FAJF (R33) | trade volumes (F10) |