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Further Development of International Production Networks and Job Reallocation in Japan

Author

Listed:
  • Mitsuyo Ando

    (Professor, Faculty of Business and Commerce, Keio University)

Abstract

Japan has been one of the major players of production networks in East Asia with active foreign direct investment (FDI) in the manufacturing industry. How have industrial and employment adjustments proceeded domestically? To investigate further development of production networks due to globalizing corporate activities and job reallocation in Japan, this paper analyzes the relationship between the enhancement of expanding foreign operations and domestic adjustments in terms of employment, mainly using the method of job creation and job destruction. In addition, the paper examines domestic adjustments to import competition. Our results demonstrate that Japan can retain domestic employment elastically because of the division of labor on a production process/task basis, rather than on an industry basis. While imports increase according to the development of production networks, their effective use activates domestic employment. Even in a manufacturing industry with active FDI, employment adjustments are relatively flexible, particularly at the firm level (among firms in the same manufacturing sector) and at the intra-firm section level (among intra-firm sections of the same firm), for instance by strengthening headquarters services, which contributes to maintaining or expanding domestic employment.

Suggested Citation

  • Mitsuyo Ando, 2020. "Further Development of International Production Networks and Job Reallocation in Japan," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 16(1), pages 135-162, February.
    • Handle: RePEc:mof:journl:ppr16_01_07
    as

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    File URL: http://www.mof.go.jp/english/pri/publication/pp_review/ppr16_01_07.pdf
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    References listed on IDEAS

    as
    1. Mitsuyo Ando & Fukunari Kimura, 2005. "The Formation of International Production and Distribution Networks in East Asia," NBER Chapters, in: International Trade in East Asia, pages 177-216, National Bureau of Economic Research, Inc.
    2. Daron Acemoglu & David Autor & David Dorn & Gordon H. Hanson & Brendan Price, 2016. "Import Competition and the Great US Employment Sag of the 2000s," Journal of Labor Economics, University of Chicago Press, vol. 34(S1), pages 141-198.
    3. Ando, Mitsuyo, 2006. "Fragmentation and vertical intra-industry trade in East Asia," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 257-281, December.
    4. Takatoshi Ito & Andrew K. Rose, 2005. "International Trade in East Asia," NBER Books, National Bureau of Economic Research, Inc, number ito_05-1, January.
    5. Ito, Takatoshi & Rose, Andrew K. (ed.), 2005. "International Trade in East Asia," National Bureau of Economic Research Books, University of Chicago Press, number 9780226378961, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    production networks; foreign direct investment; multinational enterprise; domestic employment; manufacturing industry;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor

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