Local Labor Market Effects of Chinese Imports and Offshoring: Evidence from Matched-Foreign Affiliate-Domestic Parent-Domestic Plant Data in Japan

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
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This study examines the local labor market effects of offshoring on manufacturing activities. One of the contributions of this study is that it develops matched foreign affiliate-domestic parent-domestic plant data on Japan from 1995 to 2016 to measure the manufacturing employment and offshoring of manufacturing activities at the local level. Our results indicate that while exposure to Chinese import competition negatively affects local manufacturing employment, offshoring exposure contributes to mitigating such negative effects. We find that a 10 percent increase in foreign manufacturing employment drives a 1 percent increase in local employment. We also find that offshoring exposure has a significantly positive effect on the employment of non-offshoring firms in the same local labor market. Our results indicate that offshoring has a negative impact on local employment.