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Temporary Workers, Permanent Workers, and International Trade: Evidence from Japanese firm-level data

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  • MATSUURA Toshiyuki
  • SATO Hitoshi
  • WAKASUGI Ryuhei

Abstract

The 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 Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11030.

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Length: 40 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:eti:dpaper:11030

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  1. Victor Aguirregabiria & Cesar Alonso-Borrego, 2009. "Labor contracts and flexibility : evidence from a labor market reform in Spain," Economics Working Papers we091811, Universidad Carlos III, Departamento de Economía.
  2. Eckel, Carsten & Neary, J Peter, 2006. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," CEPR Discussion Papers 5941, C.E.P.R. Discussion Papers.
  3. Bentolila, Samuel & Saint-Paul, Gilles, 1992. "The macroeconomic impact of flexible labor contracts, with an application to Spain," European Economic Review, Elsevier, vol. 36(5), pages 1013-1047, June.
  4. Thierry Mayer & Gianmarco Ottaviano, 2008. "The Happy Few: The Internationalisation of European Firms," Intereconomics: Review of European Economic Policy, Springer, vol. 43(3), pages 135-148, May.
  5. Volker Nocke & Stephen Yeaple, 2006. "Globalization and Endogenous Firm Scope," NBER Working Papers 12322, National Bureau of Economic Research, Inc.
  6. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  7. Gilles Saint-Paul, 1997. "Dual Labor Markets: A Macroeconomic Perspective," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262193760, January.
  8. James Costain & Juan F. Jimeno & Carlos Thomas, 2010. "Employment fluctuations in a dual labor market," Banco de Espa�a Working Papers 1013, Banco de Espa�a.
  9. WAKASUGI Ryuhei & TODO Yasuyuki & SATO Hitoshi & NISHIOKA Shuichiro & MATSUURA Toshiyuki & ITO Banri & TANAKA Ayumu, 2008. "The Internationalization of Japanese Firms: New Findings Based on Firm-Level Data," Discussion papers 08036, Research Institute of Economy, Trade and Industry (RIETI).
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Cited by:
  1. MATSUURA Toshiyuki, 2013. "Why Did Manufacturing Firms Increase the Number of Non-regular Workers in the 2000s? Does international trade matter?," Discussion papers 13036, Research Institute of Economy, Trade and Industry (RIETI).

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