Econometric Analysis on the Impact of China Shock on Employment in Japan

After China's accession to the WTO, the impact of increased competition from Chinese imports (the China shock) on employment and productivity in many developed countries has become a major concern for policy makers. The ratio of manufacturing workers to the total number of employees is declining, which indicates that Japan is no exception. The paper empirically analyzes the impact of the increase in the China shock on employment by using the questionnaire information of the Census of Manufacture, product-level trade data by custom and country, and National Freight Net Flow Survey (Logistics Census). The results indicate that intermediate imports from China have a positive impact on employment while capital goods from China might have a negative impact on employment growth in Japan. Thus, removing trade barriers to intermediate products as well as participating in GVCs play a key role for employment growth in Japan.