| Author Name | KIYOTA Kozo (Research Associate, RIETI) / NAKAJIMA Kentaro (Faculty Fellow, RIETI) / TAKIZAWA Miho (Gakushuin University) |
|---|---|
| Creation Date/NO. | March 2022 22-E-013 |
| Research Project | Determinants of Firm Dynamics: Causal Inference Approach |
| Download / Links | |
| Notes |
First draft: March 2022 |
Abstract
This study examines the effects of outward manufacturing foreign direct investment (FDI) on the local labor market. One of its contributions is investigating possible spillover effects from FDI firms to non-FDI firms. To do so, we develop unique matched data on foreign affiliates, domestic parents, and domestic plants in Japan from 2001 to 2016. Our results suggest that outward manufacturing FDI positively affects local manufacturing employment in Japan. Specifically, we find that a 1 percent increase in foreign manufacturing employment leads to a 0.9 percent increase in local employment. However, this positive employment effect is observed in non-FDI firms, not FDI firms. Outward FDI by FDI firms positively affects the output, exports, and employment of non-FDI firms in the same local market.
* We revised this discussion paper with the new title in December 2025. This paper was previously circulated under the title "Local Labor Market Effects of Chinese Imports and Offshoring: Evidence from Matched-Foreign Affiliate-Domestic Parent-Domestic Plant Data in Japan."
