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The Impact of a Demand Shock on the Employment of Temporary Agency Workers: Evidence from Japan during the global financial crisis

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  • HOSONO Kaoru
  • TAKIZAWA Miho
  • TSURU Kotaro

Abstract

This study investigates the effect of a negative demand shock on the composition of the type of workers at firms, focusing on the change in the share of temporary agency in all workers. To clearly identify the causal link between the demand a firm faces and the composition of its workforce in terms of the type of workers and rule out any reverse causation, we use the 2007-2009 global financial crisis as a natural experiment, with the drop in demand experienced by exporting firms in Japan serving as an exogenous demand shock. We find that firms with a higher export ratio, a higher share of temporary agency workers, and a larger increase in the share of temporary agency worker ratio prior to the crisis decreased the share of temporary agency workers more than other firms in response to the demand shock. We also find that firms with a higher liquid asset ratio and higher volatility in their sales decreased the share of temporary agency workers less than other firms during the crisis. These results suggest that temporary agency workers serve as a buffer against demand shocks.

Suggested Citation

  • HOSONO Kaoru & TAKIZAWA Miho & TSURU Kotaro, 2014. "The Impact of a Demand Shock on the Employment of Temporary Agency Workers: Evidence from Japan during the global financial crisis," Discussion papers 14046, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:14046
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    References listed on IDEAS

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    6. HOSONO Kaoru & TAKIZAWA Miho & TSURU Kotaro, 2011. "International Transmission of the 2008 Crisis: Evidence from the Japanese stock market," Discussion papers 11050, Research Institute of Economy, Trade and Industry (RIETI).
    7. HOSONO Kaoru & TAKIZAWA Miho & TSURU Kotaro, 2013. "International Transmission of the 2008-09 Financial Crisis: Evidence from Japan," Discussion papers 13010, Research Institute of Economy, Trade and Industry (RIETI).
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    11. 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.
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