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Foreign direct investment and temporary workers in Japan

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  • Tanaka, Ayumu

Abstract

The rapid growth in the number of temporary workers in Japan during the 2000s generated greater income inequality and greater job insecurity because temporary workers’ wages are lower and their jobs are more tenuous than those of permanent workers. However, little is established about the relation between globalization and domestic growth in the temporary workforce. This study examines that relationship. It investigates whether the initiation of foreign direct investment (FDI) into Asia increased temporary workers’ share of total wages and employment. This study employs a first-differenced difference-in-difference estimation with propensity score matching to examine how the initiation of FDI among Japanese manufacturers during 2003–2004 affected domestic employment. Firm-level data cover the period following the 2004 deregulation, which accelerated increases in the number of temporary workers by allowing manufacturers to employ such workers indirectly through employment agencies. Positive effects of vertical FDI are observed on the temporary worker ratio one year after starting FDI, but vanish in subsequent years. Therefore, this study concludes that the relationship between temporary workers and offshoring is complementary in the early stage of FDI and that no persistent effect of offshoring occurs that results in greater income inequality and greater job insecurity through an increase in the number of temporary workers.

Suggested Citation

  • Tanaka, Ayumu, 2017. "Foreign direct investment and temporary workers in Japan," Journal of Asian Economics, Elsevier, vol. 48(C), pages 87-99.
    • Handle: RePEc:eee:asieco:v:48:y:2017:i:c:p:87-99
    DOI: 10.1016/j.asieco.2016.10.004
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    Cited by:

    1. Mihi-Ramirez, Antonio & Sobierajc, Janusz & Garcia-Rodriguez, Yolanda, 2019. "Interaction of emigration and immigration with foreign direct investment, international trade and remittances," Economics Discussion Papers 2019-63, Kiel Institute for the World Economy (IfW Kiel).
    2. Kiyota, Kozo & Maruyama, Sawako, 2017. "ICT, offshoring, and the demand for part-time workers: The case of Japanese manufacturing," Journal of Asian Economics, Elsevier, vol. 48(C), pages 75-86.
    3. NI Bin & KATO Hayato & LIU Yang, 2020. "Does It Matter Where You Invest? The Impact of FDI on Domestic Job Creation and Destruction," Discussion papers 20008, Research Institute of Economy, Trade and Industry (RIETI).
    4. Thompson, Edmund R. & Dericks, Gerard H. & Fai, Felicia, 2019. "Development and validation of a firm-level vertical and horizontal internationalization metric," International Business Review, Elsevier, vol. 28(3), pages 533-543.
    5. Bin Ni & Hayato Kato & Yang Liu, 2023. "Does it matter where you invest? The impact of foreign direct investments on domestic job creation and destruction," The World Economy, Wiley Blackwell, vol. 46(1), pages 135-152, January.
    6. A. Kuznetsov V. & А. Кузнецов В., 2017. "Особенности Инвестиционной Стратегии Японии И Перспективы Сотрудничества С Россией // Peculiarities Of Investment Strategies Of Japan And The Prospects Of Cooperation With Russia," Финансы: теория и практика/Finance: Theory and Practice // Finance: Theory and Practice, ФГОБУВО Финансовый университет при Правительстве Российской Федерации // Financial University under The Government of Russian Federation, vol. 21(6), pages 108-117.

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    More about this item

    Keywords

    Foreign direct investment; Difference-in-difference estimation; Propensity score matching; Temporary workers;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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