The China shock and job reallocation in Japan

Abstract

This study investigates the characteristics of manufacturing job reallocation in Japan induced by import shocks from China during 1996–2016. Three types of import shocks are considered: direct, upstream, and downstream. Some salient features of job reallocation include decrease in total jobs from direct import, increase in small establishments’ jobs from downstream import, and job changes mainly induced establishments’ entry and exit. The sizeable difference of implied job changes in industry-level analysis and those in region-level analysis attributes to the local reallocation and aggregate demand effects determined by regional characteristics. The total job effect of three import shocks is negative in all cases examined. The method of decomposing job changes into detailed job flows and further into industry and regional factors, proposed in this study, enabled obtaining a clearer view of job reallocation and how import shocks travel through labor market.