The Impact of Imports from Low-Wage Countries The Role of Regional Characteristics on Plant Employment Growth and the Survival of Plants from The Competition in Japanese Manufacturing (in Japanese)

From the late 1980s, Japanese manufacturers have begun the relocation of their production sites from Japan to low-wage East Asian countries such as China and Thailand. Partly due to this plant relocation, imports of manufacturing goods from these low-wage countries in East Asia increased substantially in the late 1980s and 1990s. Such relocation and the rapid rise in imports have led to concerns among policymakers that labor demand in the regions with labor-intensive industries may substantially decline. This paper is the first empirical study that attempts to examine how employment growth and the survival of the plants are affected by location in regions highly exposed to the increased import penetration from low-wage countries. We take into account the difference in the degree of various industrial agglomerations (input linkage agglomeration, output linkage agglomeration, and inter-industry agglomeration) over regions. For this purpose, we use micro data from the "Census of Manufacturer" and construct a rich, plant-level dataset covering the 1980s and 1990s on all Japanese manufacturing sectors. We find that an increase in import penetration from low-wage countries has a negative impact on employment growth and the survival of plants from the competition in total. However, high productivity and large plants are less affected by imports. In addition, plants in the region with high input linkage agglomeration and/or high intra-industry agglomeration suffer less from such a negative impact. This could reflect the fact that these plants succeed in differentiating their products against the competing imported goods.