This paper considers the implications of relationship-specific investment within keiretsu for policies aimed at opening the Japanese market for intermediate goods, such as auto parts. Both VIEs applied to parts and VERs restricting Japanese exports of autos cause the keiretsu to import a wider range of parts, but of a relatively unimportant type, such as seat covers. Since keiretsu investment and output fall, the total value of U.S. parts exports may actually fall. For a given value of these exports, a VIE is less costly for U.S. consumers and Japanese producers, but a VER is preferred by U.S. automakers.
Bibliographical noteThis paper has benefited from presentation at Columbia University (Economics), New York University (Economics) and at the University of British Columbia (Commerce). An earlier version of this paper was titled, ‘Keiretsu and Relational Quasi Rents: Implications for VIEs and VERs’. Financial support was provided by the Social Sciences and Humanities Research Council of Canada.
QIU, L. D., & SPENCER, B. J. (2002). Keiretsu and relationship-specific investment : implications for market-opening policy. Journal of International Economics, 58(1), 49-79. https://doi.org/10.1016/S0022-1996(01)00158-1