Exposure to Low-wage Country Imports and the Growth of Japanese Manufacturing Plants

Author Name Anna Maria MAYDA  (Georgetown University) /NAKANE Masato  (Consulting Fellow, RIETI) /STEINBERG, Chad  (Consulting Fellow, RIETI) /YAMADA Hiroyuki  (Osaka University)
Creation Date/NO. June 2012 12-E-038
Research Project Productivity of Industries and Firms and Japanese Economic Growth
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Japan's trade structure has changed remarkably in the past two decades with an increase of imports of manufactured goods from low-wage countries, in particular China. This has contributed to the impression of a hollowing out effect in manufacturing. Against this background, we analyze the role of international trade in the reallocation of Japanese manufacturing within and across industries from 1989 to 2006. We estimate the impact of industry exposure to low-wage country imports on Japanese plants' survival and employment growth. The analysis is conducted with a panel dataset of over 4.5 million observations on Japanese manufacturing plants. Our results are broadly consistent with the factor proportions model of trade, as we find that plant survival and growth are negatively associated with industry exposure to low-wage country imports.