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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

  • Sanghoon Ahn
  • Kyoji Fukao
  • Keiko Ito

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://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd08-001.pdf
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Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd08-001.

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Date of creation: Oct 2008
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Handle: RePEc:hst:ghsdps:gd08-001
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  1. 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.
  2. Vanessa Strauss-Kahn, 2004. "The Role of Globalization in the Within-Industry Shift Away from Unskilled Workers in France," NBER Chapters, in: Challenges to Globalization: Analyzing the Economics, pages 209-234 National Bureau of Economic Research, Inc.
  3. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Investment, Outsourcing and Relative Wages," NBER Working Papers 5121, National Bureau of Economic Research, Inc.
  4. Ekholm, Karolina & Hakkala, Katariina, 2006. "The Effect of Offshoring on Labour Demand: Evidence from Sweden," CEPR Discussion Papers 5648, C.E.P.R. Discussion Papers.
  5. 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.
  6. Falk, Martin & Koebel, Bertrand M, 2002. " Outsourcing, Imports and Labour Demand," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 567-86, December.
  7. Kyoji Fukao & Keiko Ito, 2003. "Physical and Human Capital Deepening and New Trade Patterns in Japan," Hi-Stat Discussion Paper Series d03-03, Institute of Economic Research, Hitotsubashi University.
  8. 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.
  9. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
  10. 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, 07.
  11. Alexander Hijzen & Holger Görg & Robert C. Hine, 2005. "International Outsourcing and the Skill Structure of Labour Demand in the United Kingdom," Economic Journal, Royal Economic Society, vol. 115(506), pages 860-878, October.
  12. Zvi Griliches & Jerry A. Hausman, 1984. "Errors in Variables in Panel Data," NBER Technical Working Papers 0037, National Bureau of Economic Research, Inc.
  13. 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.
  14. 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.
  15. 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.
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