Examining the Impact of the 2011 Japanese Earthquake on Japanese Production Networks in the Republic of Korea: A Firm-level Data Analysis

Jung Hur and Chin Hee Hahn
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Chin Hee Hahn: Gachon University

No DP-2024-25, Working Papers from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: This paper examines the impact of the 2011 Japanese earthquake on the sales and purchases of firms that have an intra-firm network with Japan. Using unique firm-level data of the Republic of Korea (henceforth, Korea) and applying a difference-in-differences model, we find two results. First, following the 2011 Japanese earthquake, Japanese subsidiaries in Korea switched their intra-firm sales patterns with a reduction in intra-firm export and an increase in intra-firm domestic sales, compared to non-Japan foreign subsidiaries in Korea. Second, however, the sales or purchases of Korean mother firms with subsidiaries in Japan were negatively affected, compared to either non-foreign direct investment (FDI) firms or FDI firms without subsidiaries in Japan. The results imply that the Japanese subsidiaries in Korea had a relatively resilient and flexible intra-firm network, whilst the Korean firms with subsidiaries in Japan did not.

Keywords: FDI firms; Intra-firm Sales and Purchases (search for similar items in EconPapers)
JEL-codes: E32 F10 F23 (search for similar items in EconPapers)
Date: 2024-09-26
New Economics Papers: this item is included in nep-int, nep-inv and nep-net
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