International Fragmentation of Production

International Fragmentation of Production

The Impact of Outsourcing on the Japanese Economy

Nobuaki Yamashita

Using state-of-the-art econometric tools, this book examines the implications of international fragmentation of production for the performance of the Japanese manufacturing industry.

Chapter 5: Structural Transformation and Labour Market Adjustment in Japanese Manufacturing

Nobuaki Yamashita

Subjects: asian studies, asian economics, economics and finance, asian economics, industrial economics


INTRODUCTION 5.1 The subject of this chapter is the labour market implications of production fragmentation: how the relocation of the production process inevitably changes the nature of labour demand in the home economy. Before the formal empirical investigation this chapter documents the background to the changing nature of Japanese manufacturing and its labour market performance. In particular, the primary focus is to highlight the trends and patterns of the skill compositional change and the wage structure by skills in Japanese manufacturing over the last two decades (known as skill upgrading in the literature). The analysis in this chapter draws on the basic labour market indicators and makes a comparison with US manufacturing. The deteriorating position of unskilled workers is clearly one of the key policy concerns for developed countries in recent years. Wage inequality between skilled and unskilled workers has widened substantially since 1980 in many developed countries, particularly in the UK and the USA (Katz and Revenga, 1989; Katz and Murphy, 1992; Berman et al., 1994). At the same time, the manufacturing employment structure has also been changing in favour of skilled workers in most developed countries (Berman et al., 1994; OECD, 1997). In order to place the main analysis in perspective, this chapter begins with a discussion of the overall manufacturing experiences and structural change in the Japanese economy over the last 40 years. Section 5.3 then examines the ongoing skill compositional changes in manufacturing employment and the wage structure by skills and Section 5.4 summarizes the key...

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