Why Did Manufacturing Firms Increase the Number of Non-regular Workers in the 2000s? Does international trade matter?

This paper examines whether there is any link between export openness and the temporary workers ratio at firms. First, we investigate the effect of export openness on sales volatility using Japanese firm-level data. Next, we examine whether firms will increase the number of temporary workers as their sales volatility changes. Finally, we calculate to what extent changes in the temporary workers ratio are attributable to the sales volatility that is caused by exporting. We find statistically significant evidence that a foreign demand shock through exports affects the sales volatility at the firm level and that increases in the sales volatility induce the extensive use of temporary workers. Indeed, we find that those firms that incur a higher fixed employment cost make extensive use of temporary workers when the sales growth volatility rises. However, quantitative evaluation of the effects of exporting on the temporary workers ratio shows that the magnitude of these effects is quite small. We conclude that the impacts of firms' exporting status and export share on the temporary workers ratio are statistically significant but economically negligible in size. Thus, it is not appropriate to attribute the cause of increases in the temporary workers ratio to increased foreign shocks that occur because of exporting.