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Examining the Impact of the 2011 Japanese Earthquake on Japanese Production Networks in the Republic of Korea: A Firm-level Data Analysis

Author

Listed:
  • Jung HUR

    (Sogang University)

  • Chin Hee HAHN

    (Gachon University)

Abstract

This paper examines the impact of the 2011 Japanese earthquake on the sales and purchases of firms that have an intra-firm network with Japan. Using unique firm-level data of the Republic of Korea (henceforth, Korea) and applying a difference-in-differences model, we find two results. First, following the 2011 Japanese earthquake, Japanese subsidiaries in Korea switched their intra-firm sales patterns with a reduction in intra-firm export and an increase in intra-firm domestic sales, compared to non-Japan foreign subsidiaries in Korea. Second, however, the sales or purchases of Korean mother firms with subsidiaries in Japan were negatively affected, compared to either non-foreign direct investment (FDI) firms or FDI firms without subsidiaries in Japan. The results imply that the Japanese subsidiaries in Korea had a relatively resilient and flexible intra-firm network, whilst the Korean firms with subsidiaries in Japan did not.

Suggested Citation

  • Jung HUR & Chin Hee HAHN, 2024. "Examining the Impact of the 2011 Japanese Earthquake on Japanese Production Networks in the Republic of Korea: A Firm-level Data Analysis," Working Papers DP-2024-25, Economic Research Institute for ASEAN and East Asia (ERIA).
    • Handle: RePEc:era:wpaper:dp-2024-25
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    Keywords

    FDI firms; Intra-firm Sales and Purchases;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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