Keiretsu and Relationship-Specific Investment: A Barrier to Trade?

Barbara Spencer and Larry Qiu

No 7572, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops a model of informal procurement within Japanese keiretsu so as to consider effects on intermediate-good imports, such as auto parts. Parts-suppliers make relationship-specific investments that benefit the auto-maker and prices are determined by bargaining after investment has been sunk. Although this investment raises efficiency, it limits the range of imports to less important parts such as tail pipes and it is possible that no parts are imported, despite lower foreign production costs. Lack of information concerning investment rents combined with counterintuitive effects on imports and Japanese production costs could create unwarranted perceptions of a trade barrier.

JEL-codes: F12 (search for similar items in EconPapers)
Date: 2000-02
Note: ITI
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Citations: View citations in EconPapers (1)

Published as Spencer, Barbara J. and Larry D. Qiu. "Keiretsu And Relationship-Specific Investment: A Barrier To Trade?," International Economic Review, 2001, v42(4,Nov), 871-901.

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