Employment Adjustments of Regular and Non-Regular Workers to Exogenous Shocks: Evidence from Exchange-Rate Fluctuation

Izumi Yokoyama (), Kazuhito Higa and Daiji Kawaguchi

ILR Review, 2021, vol. 74, issue 2, 470-510

Abstract: The authors investigate the adjustments in employment of regular and non-regular workers, exploiting the exchange-rate fluctuation and heterogeneous dependence on international trade across firms as a source of exogenous variation. An analysis of panel data of Japanese manufacturers reveals that the appreciation of the Japanese yen spontaneously decreased the sales of exporters and the employment of non-regular workers, but it did not reduce the employment of regular workers. This finding provides support for the claim that firms are likely to adjust the employment of non-regular workers to absorb exogenous shocks and to insulate regular workers from the shocks in an uncertain business environment. In exploring the mechanism driving these results, the authors also find that exporters use the employment of non-regular workers and wages of regular workers as adjustment margins for the exchange-rate fluctuation to hoard regular workers, who presumably hold higher levels of firm-specific human capital.

Keywords: exchange rate; exporter; importer; employment; regular worker; non-regular worker (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ilrrev:v:74:y:2021:i:2:p:470-510

DOI: 10.1177/0019793919887961

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