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Physical and Human Capital Deepening and New Trade Patterns in Japan

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  • Keiko Ito
  • Kyoji Fukao

Abstract

This paper investigates the deepening of the international division of labor and its effect on factor intensities in Japan, mainly focusing on the manufacturing sector. In the first half of the paper, we analyze the factor contents of trade and find that Japan's factor content net-exports of capital and non-production labor grew rapidly while net-exports of production workers fell by a large amount during the period from 1980-2000. Interestingly, the decline in the factor content of net-exports of production workers was almost entirely caused by Japan's trade with China and Hong Kong. According to our decomposition analysis, however, most of the macro-economic change in the capital-labor ratio and the change in the skilled-labor ratio is attributable to a within-industry'shift rather than a between-industry' shift. Although we clearly see a drastic increase in VIIT and outsourcing to foreign countries, particularly to Asian countries, our empirical analysis provides only weak evidence that the deepening international division of labor contributes to changes in factor intensities in each industry. Our results suggest that specialization in the export of skilled-labor-intensive products may have contributed to the increase in the relative demand for skilled (professional, technical, managerial, and administrative) labor within industry. However, our results suggest that changes in trade patterns (specialization in capital-intensive production) cannot explain the rapid growth of capital-labor ratios in Japan.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10209.

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Date of creation: Jan 2004
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Publication status: published as Physical and Human Capital Deepening and New Trade Patterns in Japan , Keiko Ito, Kyoji Fukao. in International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14 , Ito and Rose. 2005
Handle: RePEc:nbr:nberwo:10209

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  1. Lionel Fontagné & Michaël Freudenberg & Nicolas Peridy, 1997. "Trade Patterns Inside the Single Market," Working Papers 1997-07, CEPII research center.
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  10. Fukao, Kyoji & Ishido, Hikari & Ito, Keiko, 2003. "Vertical Intra-Industry Trade and Foreign Direct Investment in East Asia," Discussion Paper Series a434, Institute of Economic Research, Hitotsubashi University.
  11. Hak K. Pyo & Kwanghee Nam, 1999. "A Test of the Convergence Hypothesis by Rates of Return to Capital: Evidence from OECD Countries," CIRJE F-Series CIRJE-F-51, CIRJE, Faculty of Economics, University of Tokyo.
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Cited by:
  1. Ahn, Sanghoon & Fukao, Kyoji & Ito, Keiko, 2009. "The Impact of Outsourcing on the Japanese and South Korean Labor Markets: International Outsourcing of Intermediate Inputs and Assembly in East Asia," CEI Working Paper Series 2008-27, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  2. Elisabeth Kutschka, 2011. "Quality Upgrading, Skill Demand and International Trade: The Case of German Manufacturing," FEMM Working Papers 110022, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  3. Fukunari Kimura & Ayako Obashi, 2011. "Production Networks in East Asia : What We Know So Far," Microeconomics Working Papers 23216, East Asian Bureau of Economic Research.
  4. Nobuaki Yamashita, 2008. "The Impact of Production Fragmentation on Skill Upgrading: New Evidence from Japanese Manufacturing," Departmental Working Papers 2008-06, The Australian National University, Arndt-Corden Department of Economics.
  5. ANDO Mitsuyo & KIMURA Fukunari, 2011. "Globalizing Corporate Activities in East Asia and Impact on Domestic Operations: Further evidence from Japanese manufacturing firms," Discussion papers 11034, Research Institute of Economy, Trade and Industry (RIETI).
  6. Kyoji Fukao & Toshihiro Okubo, 2004. "Why Has the Border Effect in the Japanese Market Declined?: The Role of Business Networks in East Asia," Hi-Stat Discussion Paper Series d03-24, Institute of Economic Research, Hitotsubashi University.
  7. ANDO Mitsuyo & KIMURA Fukunari, 2007. "International Production/Distribution Networks and Domestic Operations in terms of Employment and Corporate Organization: Microdata Analysis of Japanese Firms," Discussion papers 07063, Research Institute of Economy, Trade and Industry (RIETI).
  8. Fukunari Kimura, 2009. "The Nature and Characteristics of Production Networks in East Asia: Evidences from Micro/Panel Data Analyses," Global COE Hi-Stat Discussion Paper Series gd09-093, Institute of Economic Research, Hitotsubashi University.

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