Japan's Oligopolies: Potential Gains from Third Arrow Reforms

62 Pages Posted: 19 Jan 2016

See all articles by Akihito Asano

Akihito Asano

Sophia University

Rod Tyers

Australian National University (ANU) - School of Economics; The University of Western Australia - Department of Economics

Date Written: January 18, 2016

Abstract

Progress has been made in economic reform under the “Abenomics” first (monetary policy) and second (taxation reform) “arrows”. The third, which emphasises structural reforms, has been more politically difficult, thus far yielding mixed results. This paper explores the gains that are possible from the labour market, tax and competition reforms embodied in the third arrow program. Economic rents and industry concentration levels are first identified from Nikkei firm specific data and used to construct an economy-wide model that represents oligopoly behaviour and its regulation explicitly. The analysis finds that modest gains in efficiency are available labour growth and, when it is accompanied by corporate governance reform, the switch between company and consumption taxation. Larger gains are shown to be available from active competition policy and, particularly, from productivity enhancing FDI in services. Central to the results is that a resurgent Japanese economy requires efficiency improvements that raise home rates of return and rebalance its large home and foreign asset portfolio toward home investment and capital growth.

Keywords: Regulation, oligopoly, services, price caps, privatisation, general equilibrium, industrial reform

JEL Classification: C68, D43, D58, F41, F47, L13, L43, L51, L80

Suggested Citation

Asano, Akihito and Tyers, Rod, Japan's Oligopolies: Potential Gains from Third Arrow Reforms (January 18, 2016). CAMA Working Paper 3/2016. Available at SSRN: https://ssrn.com/abstract=2717750 or http://dx.doi.org/10.2139/ssrn.2717750

Akihito Asano

Sophia University ( email )

Tokyo, 102
United States

Rod Tyers (Contact Author)

Australian National University (ANU) - School of Economics ( email )

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Australian National University
Canberra, Australian Capital Territory 0200
Australia
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The University of Western Australia - Department of Economics ( email )

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Australia
61 8 6488 5632 (Phone)

HOME PAGE: http://www.business.uwa.edu.au/school/staff-profiles?type=profile&dn=cn%3DRodney%20Tyers%2Cou%3DEcon

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