How Do Exporters Respond to Exogenous Shocks: Evidence from Japanese firm-level data

         
Author Name TANAKA Ayumu (Research Associate, RIETI) / ITO Banri (Research Associate, RIETI) / WAKASUGI Ryuhei (Faculty Fellow, RIETI)
Creation Date/NO. March 2017 17-E-027
Research Project Empirical Studies on the Chinese Market and Trade Policy
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Abstract

This study investigates how exporters respond to an exogenous shock, using the 2012 customer boycott of Japanese products in China that occurred after a political conflict over the islands in the East China Sea. By using Japanese firm-level data for 2011-2013 and employing the difference-in-differences method, we conduct an assessment of the boycott. We find that Japanese firms faced a large decrease in exports to China after the 2012 boycott and that the decrease in exports was more pronounced for arm's length exports than intra-firm exports. In addition, the estimation results provide evidence that Japanese firms exporting to China responded to the exogenous trade shock by reducing their number of temporary workers. This finding suggests that trade shocks due to international conflicts hit the most insecure workers.