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Knowledge Co-Creation - Profiles of researchers

Using econometrics as a tool to investigate the environmental activities of people and organizations

Hajime Katayama
Associate Professor, Waseda University School of Commerce

Utilizing econometrics in all areas

My area of expertise is applied econometrics. Econometrics is an academic discipline pertaining to the methodology of data analysis. By applying econometric techniques, I have ventured into many areas of economics. Economics is a surprisingly large field. Besides macroeconomics and microeconomics, there are many branches such as labor economics, industrial organization, international trade, and environmental economics. Research subjects are also diverse, including countries, industries, organizations and individuals.

My interest in applied econometrics was initially sparked by—dare I admit it—my enjoyment of pachinko pinball gambling back when I was in college. I was a sociology major as an undergraduate and had no connection to economics. After seeing there was a faculty member that specialized in econometrics, I figured learning about data analysis and simulation would help me win at pachinko. Therefore, for the sake of this less-than-noble cause, I enrolled in their seminar.

After analyzing pachinko, I discovered to my dismay that you cannot win through theory alone. However, the programming abilities I acquired when simulating pachinko became extremely useful for applying econometric methods.

I completed my undergraduate degree and went on to get my master's degree. However, the economic bubble burst just as I began looking for a job. Lost and not knowing what to do, my supervisor told me, “You should go overseas, you shouldn’t stay in Japan.” I made up my mind and enrolled in the doctoral program in economics at The Pennsylvania State University. I think I was the most unlikely candidate to end up as a researcher or go abroad. In retrospect, it was a decision that I was able to make precisely because I was so utterly clueless.

Overcoming obstacles and moving on to applied research

In my third year as a PhD student and after two years of lecture coursework, I joined my supervisor’s research project in preparation to write my doctoral thesis. The research was on time series analysis of macroeconomic data. However, our research had gone nowhere after two years without any remarkable results. In another series of unfortunate events, just as I was at my wit's end during my fourth year of the doctoral program, my supervisor transferred to another university. This made me seriously consider give up becoming a researcher and returning to Japan.

My supervisor invited me to come along to the other university. However, Professor Susumu Imai (currently Associate Professor at the University of Technology, Sydney), who was teaching at Penn State and had always treated me kindly asked me to join his research team. I chose to join him and dove into the completely new field of crime analysis. My research theme was analyzing individual criminal behavior, by using data from a panel survey of 10,000 youths (repeated investigations made over a long term). I estimated a quantitative model of crime and wrote my doctoral thesis.

Looking back on it now, it was Professor Imai’s and my decision to take a plunge and change my direction that played the biggest part in defining my career as an applied econometrician.

Intense teaching experience at the University of Sydney

After spending seven years in the United States obtaining my doctorate, I became a lecturer in Australia (equivalent of an assistant professor in the U.S.) at the University of Sydney’s School of Business and Economics. The School had a unique structure with separate departments for economics and econometrics. I belonged to both departments.

In Australia, undergraduate degree programs are three years long after which only exceptional students can participate in a yearlong program called the honors program. In the economics honors program, there are about twenty students and in the econometrics program, there are about ten students. They enroll in coursework and conduct research. Each faculty member supervises only one or two students, which makes intensive education possible.

My aim as a supervisor was to prepare students within one year to be able to submit papers to academic journals. Research themes varied from student to student, and I had my students write on diverse topics. One student, for example, analyzed the past performances and player salaries of NBA basketball teams to assess how salary allocation between teams with roughly equal total salaries affected player performance. Another student wrote on the relationship between annual income and savings and another on the link between sex and drugs. Four of those essays have been published in refereed journals.

I have followed a similar approach ever since, even after returning to Japan and taking up my post here at Waseda University. In my seminar, I form groups of third year students and supervise them to produce research papers in roughly 10 months from when they joined my seminar in April. Their ultimate goal is to submit their papers to the School of Commerce’s essay contest and win the prizes. I am proud that a majority of the groups I supervised won the prizes.

While seminar classes in Japan usually consist of discussions and student presentations, I mainly lecture in my seminar classes. Econometrics is a relatively difficult field to study at a basic level because it requires mathematical and statistical knowledge and often causes problems for liberal arts students. My opinion is that it is more beneficial to acquire the tools required for studying econometrics first than to attempt presentations and discussions with insufficient knowledge. For this reason I do not ask my students to give presentations on their research or to take turns reading research articles. This is also something that I learned through my experience of systematic coursework at overseas universities.

Photograph: A day in Professor Katayama's seminar class

Investigating environmental economics and environmental management

Diagram 1: The spillover effects of environmental management systems

In regards to my research, I have expanded the scope of econometrics almost excessively, but for the past seven or eight years, I have focused my research on environmental economics and environmental management. I took interest in this field after meeting Toshihide Arimura, a professor of environmental economics (at Sophia University at the time, currently a professor in the Faculty of Political Science and Economics at Waseda University), to whom I was introduced by Professor Imai, my adviser at Penn State.

Following an invitation from Professor Arimura, we began collaborating around 2004. Professor Arimura was conducting surveys to investigate what environmental measures Japanese facilities were taking and my job was to quantitatively analyze the data. The research was based on international standards related to environmental management systems called ISO 14001. More specifically, our investigation focused on whether environmental performance had actually improved at companies with the ISO 14001 certification, or whether their initiatives were merely superficial. The analysis showed that certified companies were engaging in more proactive initiatives than non-certified companies, genuinely reducing their environmental impact.

Then we arrived at a hypothesis that certified companies might not only be implementing measures in their own companies, but also demanding their client companies to implement measures to reduce their environmental burdens. Our analysis provided evidence in support of the hypothesis. The research revealed the possibility that ISO 14001 had an unanticipated secondary effect known in economics as a spillover effect.

The paper containing these results, which I co-authored with Professor Arimura, received attention and placed highly in international citation rankings in the field of environmental economics. It was also selected by an overseas news website as one of the 15 most significant studies on green supply chain management. Environmental management at environment-conscious companies exerts influence beyond the companies themselves and up and down the supply chain. This is something that had been known intuitively, but our paper was the first thorough investigation based on actual data, both in Japan and overseas. Our achievements were recognized and I was awarded the 2014 Waseda Research Award (High-Impact Publication).

I later came up with another hypothesis. Maybe the employees of such eco-friendly companies tend to be environmentally conscious even at home. Previously, ISO 14001 had been considered almost exclusively in the context of companies, and there had been no research that analyzed its influence on employees—in particular on the energy-saving behavior of employees. So we set up an online survey, and analyzed the data. The results showed that the employees of companies with ISO 14001 certification make more of an effort out of working hours to conserve energy, engage in green driving, and used less electricity at home when compared to employees at companies without certification. This research revealed that ISO 14001 had yet another spillover effect in addition to the aforementioned effect (Diagram 1); we are currently in the process of compiling these results into a paper. Environmental management is proving to be a very fertile area for research, and it is a topic that I wish to continue exploring.

Hajime Katayama
Associate Professor, Waseda University School of Commerce

Hajime Katayama completed his doctoral degree in applied econometrics in 2003, at the Pennsylvania State University’s Department of Economics. After researching at the University of Sydney’s School of Economics between 2003 and 2010, he was appointed to his current position in 2010. He was the recipient of the 2014 Waseda Research Award (High-Impact Publication). His key papers include “Is ISO 14001 a gateway to more advanced voluntary action? The case of green supply chain management” (T.H.Arimura, N.Darnall, H.Katayama; Journal of Environmental Economics and Management 61 (2), pp.170-182), and “Is a voluntary approach an effective environmental policy instrument?: A case for environmental management systems” (T.H.Arimura, A.Hibiki, H.Katayama; Journal of Environmental Economics and Management 55 (3), pp.281-295). He is a coauthor of Economic Analysis of Emission Trading and Energy Efficiency: The Current State of Japanese Companies and Households (ed. Arimura & Takeda; Nippon Hyoron-Sha, 2012).