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The Impact of Outsourcing on the Japanese and South Korean Labor Markets: International Outsourcing of Intermediate Inputs and Assembly in East Asia

  • Ahn, Sanghoon
  • Fukao, Kyoji
  • Ito, Keiko

Applying a common empirical approach to comparable industry-level data on production, trade, and labor markets for Japan and South Korea, this paper aims to investigate the impacts of outsourcing on different sectors of the labor market focusing on differences in educational attainment. While outsourcing measures used in previous studies only take account of the outsourcing of intermediate inputs, this paper, utilizing the Asian International Input-Output Tables, incorporates the outsourcing of assembly. The econometric results indicate that outsourcing to Asia (particularly to China) has a negative impact on the demand for workers with lower education and a positive impact on the demand for workers with higher education both in Japan and Korea. Moreover, the international outsourcing of assembly has a significant impact on skill upgrading, particularly in the Korean electrical machinery sector.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/17340/1/WP2008-27a.pdf
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Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2008-27.

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Length: 34 p.
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:hit:hitcei:2008-27
Note: October, 2008
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  1. Alexander Hijzen & Holger Görg & Robert C. Hine, 2004. "International Outsourcing and the Skill Structure of Labour Demand in the United Kingdom," Discussion Papers of DIW Berlin 437, DIW Berlin, German Institute for Economic Research.
  2. Jose Campa & Linda S. Goldberg, 1997. "The evolving external orientation of manufacturing: a profile of four countries," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 53-81.
  3. Falk, Martin & Koebel, Bertrand M, 2002. " Outsourcing, Imports and Labour Demand," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 567-86, December.
  4. Ekholm, Karolina & Hakkala, Katariina, 2005. "The Effect of Offshoring on Labor Demand: Evidence from Sweden," Working Paper Series 654, Research Institute of Industrial Economics.
  5. Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Papers 95-14, California Davis - Institute of Governmental Affairs.
  6. Keiko Ito & Kyoji Fukao, 2005. "Physical and Human Capital Deepening and New Trade Patterns in Japan," NBER Chapters, in: International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14, pages 7-52 National Bureau of Economic Research, Inc.
  7. Vanessa Strauss-Kahn, 2003. "The Role of Globalization in the Within-Industry Shift Away from Unskilled Workers in France," NBER Working Papers 9716, National Bureau of Economic Research, Inc.
  8. Zvi Griliches & Jerry A. Hausman, 1984. "Errors in Variables in Panel Data," NBER Technical Working Papers 0037, National Bureau of Economic Research, Inc.
  9. Robert C. Feenstra & Gordon H. Hanson, 1996. "Globalization, Outsourcing, and Wage Inequality," NBER Working Papers 5424, National Bureau of Economic Research, Inc.
  10. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May.
  11. Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact Of Outsourcing And High-Technology Capital On Wages: Estimates For The United States, 1979-1990," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 907-940, August.
  12. Takatoshi Ito & Andrew K. Rose, 2005. "International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14," NBER Books, National Bureau of Economic Research, Inc, number ito_05-1.
  13. Keiko Ito & Kyoji Fukao, 2005. "The Vertical Division of Labor and Japanese Outward FDI: Impacts on Human Capital Deepening in Japan (in Japanese)," Hi-Stat Discussion Paper Series d05-115, Institute of Economic Research, Hitotsubashi University.
  14. Sanghoon Ahn & Kyoji Fukao & Keiko Ito, 2008. "Outsourcing in East Asia and its impact on the Japanese and Korean Labour Markets," OECD Trade Policy Papers 65, OECD Publishing.
  15. Nobuaki Yamashita, 2007. "The Impact of Production Fragmentation on Industry Skill Upgrading: New Evidence from Japanese Manufacturing," Hi-Stat Discussion Paper Series d06-202, Institute of Economic Research, Hitotsubashi University.
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