China's Impact on Regional Employment: Propagation through Supply Chains and Co-agglomeration Pattern

         
Author Name SAITO Yukiko (Senior Fellow (Specially Appointed), RIETI) / KAINUMA Shuhei (University of Tokyo) / Michal FABINGER (University of Tokyo)
Creation Date/NO. May 2020 20-E-054
Research Project Dynamics of Inter-organizational Network and Firm Lifecycle
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Abstract

How does import from China affect local labor markets in Japan? We examine this question using commuting zones as regional units, incorporating shock propagation through supply chains, as well as co-agglomeration patterns. Applying the method proposed by Autor, Dorn and Hanson (2013) and Acemoglu, et al. (2016), we investigate the impact on regional manufacturing employment. Employing the input-output table allows us to analyse how the shocks propagate to upstream/downstream industries and how regional impact is related to co-agglomeration patterns. We find that the negative direct effect on local employment is underestimated in previous studies that do not consider regional propagation of the shock through supply chains, especially the positive shock to downstream industries.

Downstream industries significantly benefit from imports from China due to low input prices, which increases local employment. We find no significant impact on upstream industries. Our results imply that the direct effect on local labor markets is weakened by effects on downstream industries within the same region.