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

  • MATSUURA Toshiyuki
  • SATO Hitoshi
  • WAKASUGI Ryuhei

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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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. 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.
  2. 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).
  3. Bentolila, Samuel & Saint-Paul, Gilles, 1994. "A model of labor demand with linear adjustment costs," Labour Economics, Elsevier, vol. 1(3-4), pages 303-326, September.
  4. Victor Aguirregabiria & Cesar Alonso-Borrego, 2009. "Labor Contracts and Flexibility: Evidence from a Labor Market Reform in Spain," Working Papers tecipa-346, University of Toronto, Department of Economics.
  5. Volker Nocke & Stephen Yeaple, 2006. "Globalization and Endogenous Firm Scope," PIER Working Paper Archive 06-015, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  6. Eckel, Carsten & Neary, J. P., 2010. "Multi-product firms and flexible manufacturing in the global economy," Munich Reprints in Economics 20525, University of Munich, Department of Economics.
  7. 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.
  8. 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.
  9. Gilles Saint-Paul, 1997. "Dual Labor Markets: A Macroeconomic Perspective," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262193760, June.
  10. 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.
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