The Development of Foreign Direct Investment and Domestic Labor Demand of Corporate Groups in Japan

This paper focuses on Japanese corporate groups and investigates how the expansion of overseas activities by their parent firms affects the domestic employment and labor demand structure. Taking advantage of the rich micro-level data sets conducted by the Ministry of Economy, Trade and Industry ("Basic Survey of Business Structure and Activities" and "Basic Survey on Overseas Business Activities"), we find a positive effect of overseas activities on the amount of domestic employment. We find, however, a negative effect on the domestic blue-collar ratio of the corporate groups. Our result implies that Japanese corporate groups hire more people and reallocate the job composition when expanding the overseas activities.