Takashi Onoda

Abstract

I reconsider the notion that industries with high transport costs concentrate in large markets to save on transport costs. A restudy of the standard model reveals that the literature misinterprets the model result, overlooking the incentive to locate in smaller markets, in which trade barriers lessen competition. Higher transport costs reinforce this incentive, offsetting transport cost savings. Instead, firms with lower transport costs focus on reducing production costs to compete in international markets. Thus, they are concentrated in lower-wage countries, creating a base for exports. In simple models, the lower-wage country coincides with the smaller-market country, causing conflation.

Abstract

Large cities specialize in income-elastic sectors. I develop a model of cities with sector-specific trade costs and income elasticities of demand to explain this finding and derive potential implications. Higher productivity and better amenities make cities larger, command agglomeration economy and higher income, and, consequently, spend more on income-elastic sectors. This demand pattern translates into a more pronounced production pattern, explaining the observed employment distribution. The model refines the market-size effect on factor prices, showing that wages rise with city (or country) size and expenditure shares in high-tradability sectors. When sectors are gross complements or high-tradability sectors are income-elastic, it suggests that large cities spend more on high-tradability sectors, raising the city-size wage premium.

Abstract

I study cooperation among reference-dependent, loss-averse players in a dynamic game with complete information. Each period, the players choose their cooperation levels, which determine their intrinsic payoffs, and update their reference points in a backward-looking manner. I characterize the subgame-perfect equilibrium that maximizes utility with Nash reversion, demonstrating that the optimal cooperation development exhibits gradualism. After initiating cooperation, the players experience higher payoffs than their initial reference points. Consequently, the reference points rise, making the penalty for deviation more severe and enabling further cooperation. Additionally, I illustrate how the developed cooperation responds to a structural shock. When a steady-state cooperation level shifts downward, transitioning to the new level entails a loss. This loss generates an additional deviation incentive, forcing the players to undergo cooperation levels lower than the new steady-state level.

Abstract

I develop a model that demonstrates how the reputation of a military can generate different paths of political transitions. When a military has a reputation for not holding on to power for a long time, citizens can tolerate frequent coups. A military with such a reputation voluntarily democratizes to maintain its reputation. This equilibrium replicates the characteristics of the political transition paths of countries like Thailand. When there is no such reputation, the citizens resist a coup to avoid a non-democratic regime. Once the military seizes power, it will never voluntarily democratize, and the non-democratic regime becomes persistent. I show that citizens can choose the combination of frequent coups and voluntary democratizations over buying out their military.