Temporary Workers, Permanent Workers, and International Trade: Evidence from Japanese firm-level data
AbstractThe number of temporary workers in Japan's labor market has increased rapidly since the 1990s. This trend is particularly remarkable in the manufacturing sector, which now relies on sales to foreign markets. This paper formalizes the idea that global competition may encourage manufactures to shift from permanent to temporary workers, proposing a model of multi-product firms motivated to reduce revenue fluctuations. Firms prefer lower sales volatility because of labor adjustment costs. In such a framework, trade liberalization encourages firms to reduce the number of products, which raises the demand for temporary workers because they entail no firing costs. The model is also empirically tested using micro-data from Japanese manufacturing plants. The model's predictions are moderately supported.
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Bibliographic InfoPaper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11030.
Length: 40 pages
Date of creation: Mar 2011
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-09 (All new papers)
- NEP-BEC-2011-04-09 (Business Economics)
- NEP-INT-2011-04-09 (International Trade)
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