Overseas Expansion of Japanese Firms and Domestic Women’s Active Engagement

This paper empirically investigates whether more internationalized firms narrowed within-firm gender wage gaps in Japan in response to institutional reform aimed at promoting women’s active engagement in the workplace. Specifically, we constructed a dataset by linking the Basic Survey on Wage Structure with the Basic Survey of Japanese Business Structure and Activities. We estimated changes in female workers’ wages relative to their male counterparts before and after the institutional reform under the Act on the Promotion of Women’s Active Engagement in Professional Life, using the triple difference method, which accounts for the firm’s degree of internationalization as measured by the status of outward foreign direct investment (FDI). The analysis revealed that firms engaging in FDI experienced a statistically significant narrowing of the gender wage gap following the institutional reform relative to those that do not engage in FDI. Furthermore, analysis confirmed that the effect was more pronounced for firms with a greater number of overseas subsidiaries. These results suggest that FDI-active firms tend to respond more proactively to the reform, undertaking within-firm labor reallocation and internal transformations aimed at fostering a gender-equitable work environment. Furthermore, firms operating in countries and regions with significant time zone differences from Japan tend to experience a relatively weaker narrowing of the gender wage gap. This indicates that greater time differences may necessitate more flexible working hours, potentially leading to unfavorable evaluations for female workers and diminishing the effectiveness of institutional reform.