Further Development of International Production Networks and Job Reallocation in Japan

Mitsuyo Ando
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Mitsuyo Ando: Professor, Faculty of Business and Commerce, Keio University

Public Policy Review, 2020, vol. 16, issue 1, 135-162

Abstract: Japan has been one of the major players of production networks in East Asia with active foreign direct investment (FDI) in the manufacturing industry. How have industrial and employment adjustments proceeded domestically? To investigate further development of production networks due to globalizing corporate activities and job reallocation in Japan, this paper analyzes the relationship between the enhancement of expanding foreign operations and domestic adjustments in terms of employment, mainly using the method of job creation and job destruction. In addition, the paper examines domestic adjustments to import competition. Our results demonstrate that Japan can retain domestic employment elastically because of the division of labor on a production process/task basis, rather than on an industry basis. While imports increase according to the development of production networks, their effective use activates domestic employment. Even in a manufacturing industry with active FDI, employment adjustments are relatively flexible, particularly at the firm level (among firms in the same manufacturing sector) and at the intra-firm section level (among intra-firm sections of the same firm), for instance by strengthening headquarters services, which contributes to maintaining or expanding domestic employment.

Keywords: production networks; foreign direct investment; multinational enterprise; domestic employment; manufacturing industry (search for similar items in EconPapers)
JEL-codes: F23 F61 F66 (search for similar items in EconPapers)
Date: 2020
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