ict, offshoring, and the demand for part-time workers: the

Summary. . . . . . . . . .Introduction

. . . . . . . . . . .Kiyota and Maruyama (2016)

. . .Conclusion

. .Appendix

.

......

ICT, Offshoring, and the Demand forPart-time Workers:

The Case of Japanese Manufacturing

Kozo KiyotaKeio University

Sawako MaruyamaKobe University

June 1, 2016

Kozo Kiyota and Sawako Maruyama Trilateral Workshop, PRI – 6/1/2016 1 / 27



. . .Conclusion

. .Appendix

Introduction


Source: Ministry of Finance (2015) International Investment Position of Japan .

30.6 39.1

119.3

143.9

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Inv

est

me

nt

Po

siti

on

(T

rill

ion

JP

Y)

Source: Ministry of Finance (2015) International Investment Position of Japan.

Japanese outward foreign direct investment (FDI) is expanding rapidly.

Kozo Kiyota

線



. . .Conclusion

. .Appendix

Pros and Cons of FDI

Current profit earned by Japanese foreign affiliates amounts to7.6 trillion JPY.

Current profit earned by Japanese firms in Japan is 24.1trillion JPY.

According to the Japanese Ministry of Economy, Trade andIndustry (METI), retained earnings owned by Japanese foreignaffiliates amount to 28.7 trillion JPY.


Notes: Trillion JPY. Others include such items as income.

Source: Ministry of Finance (2016) Balance of Payments Statistics

2.3 5.8

9.5 7.9 7.4

3.2 6.5

8.4 10.2

7.7 7.3 9.8

1.9 2.1

6.9

-3.1

-8.1

-12.3 -13.5

-2.2

1.5

1.3

0.8

0.4 1.8

1.3

1.0

1.3

2.4

2.7 3.5

3.6

2.0 3.3

4.1

4.4 3.9 6.1 6.5

8.3

7.5

11.6

15.0

13.0 14.1

10.5

13.7

16.1

19.7 18.7

20.3

24.9

14.9 13.6

19.4

10.4 4.8

3.9 2.6

16.6

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Goods and services Direct investment Others Current account

Notes: Trillion JPY. Others include such items as income.

Source: Ministry of Finance (2016) Balance of Payments Statistics.

Negative trade balance is offset by direct investment income in recentyears.

Kozo Kiyota

長方形

A Simple Theory of FDI: Win-Win Relationship

Home ForeignCapital price Capital price

S' S S* S*'

g a r*

h i r'

b c d r j k

e fD D*

O Capital O* Capital

Capital moves from home (S → S ′) to foreign (S∗ → S∗′) so that capitalprice is equalirzed to r ′.

Home = −(c + f ) & Foreign = (i + k)

Capital owner returns her profits k(= c + d + f ) from foreign to home.

Both countries can have welfare gains from FDI: Home = d & Foreign = i

Kozo Kiyota

線

Kozo Kiyota

線

8.3

22.9

0.0

5.0

10.0

15.0

20.0

25.0

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Ra

tio

of

fore

ign

pro

du

ctio

n t

o d

om

est

ic p

rod

uct

ion

(%

)

Source: Ministry of Economy, Trade and Industry (various years) Basic Survey of Overseas Business Activities.

The share of foreign production by Japanese firms is increasing...

Kozo Kiyota

線

388

208

10,321

7,403

0

2,000

4,000

6,000

8,000

10,000

12,000

0

50

100

150

200

250

300

350

400

450

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Nu

mb

er

of

wo

rke

rs (

1,0

00

)

Nu

mb

er

of

est

ab

lish

me

ns

(1,0

00

)

Number of establishments (1,000) Number of workers (1,000)

Source: Ministry of Economy, Trade and Industry (various years) Census of Manufactures.

... and the manufacturing employment is decreasing...

Kozo Kiyota

線


Do multinationals destruct more jobs than domestic firms inJapan?

No. Previous studies did not find evidences that multinationalsdestruct more jobs than domestic firms in Japan.

Possible explanations:...1 FDI helps increasing the production of intermediate inputs inthe home country, which result in the maintenance of, or anincrease in, domestic labor demand.

...2 The magnitude of job destruction is almost the same betweenJapanese multinationals and domestic firms (Yamashita andFukao, 2010, JWE).

...3 Disemployment in Japanese manufacturing was driven mainlyby substitution between capital and labor, rather than by thereallocation of labor from Japan to overseas (Kambayashi andKiyota, 2015, RWE).



. . .Conclusion

. .Appendix

Toyota’s plant

Source: http://go-centraljapan.jp/ja/spot/index 113.html




. . .Conclusion

. .Appendix


One may be concerned that the effects of FDI could bedifferent across skill types.

In particular FDI means the offshoring of productionactivities.

Offshoring increases the demand for high-skilled workers...while decreasing the demand for low-skilled workers.

Note that, theoretically, the increases in the relative demandfor skilled workers can be explained by both offshoring andskill-biased technological change (due to the use of computersand other high-tech equipment).

Kiyota and Maruyama (2016) addressed this issue.




. . .Conclusion

. .Appendix

Kozo Kiyota and Sawako Maruyama (2016)

“ICT, Offshoring, and the Demand forPart-time Workers: The Case of Japanese

Manufacturing”


Summary

What we do?

This paper examines the effects of information andcommunication technology (ICT) and offshoring on the skilldemand in Japanese manufacturing.

What’s new?

This paper focuses explicitly on the demand for low-wagepart-time workers, which we call low skilled workers.



. . .Conclusion

. .Appendix

Data

Sources

JIP database (RIETI) and IO tablesJIP database is a database like the EU-KLEMS database.

Coverage

52 manufacturing industries

Period

1980–2011 (every 5 year between 1980 and 2005, and 2011)

Worker Type

Full-time: 1) university graduates; 2) college graduates; 3)high-school graduates; 4) junior-high school graduates

Part-time (educational level is not available): defined asthe workers whose average number of hours worked in aweek is less than 35 hours.

Self-employed (educational level is not available)


Figure 1. Average WagesFigure 1. Average Wages in Japanese Labor Markets, 1980 and 2011

Source: JIP database 2014.

Note: More detailed figures on the average wage and the employment share of each group are reported in Figure 2 and Figure A1, respectively.

University

CollegeHigh

Junior High

Self-employedPart-time

University

CollegeHigh

Junior High

Part-time Self-employed

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0

Av

era

ge

Wa

ge

s /

Ho

ur

(Ja

pa

ne

se Y

en

)

Cummulative Manufacturing Workers (%)

1980 2011

...1 The average wages are different across educational level and worker types.

→ The average wages of part-time workers is less than half of that of junior-highschool graduates.

→ Difference between college/high school graduates and junior-high schoolgraduates is also not negligibly small in 2011.

Kozo Kiyota

楕円

Kozo Kiyota

楕円




University

CollegeHigh

Junior High


University

CollegeHigh

Junior High


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0

Av

era

ge

Wa

ge

s /

Ho

ur

(Ja

pa

ne

se Y

en

)


1980 2011

...2 The share of part-time workers in manufacturing employment expandedsignificantly: 7.7% in 1980 to 17.7% in 2011

→ Noting that the share of university graduates was 18.5% in 2011, the size ofpart-time workers is not negligible in Japanese manufacturing employment.

Kozo Kiyota

楕円

Kozo Kiyota

楕円

Kozo Kiyota

楕円




University

CollegeHigh

Junior High


University

CollegeHigh

Junior High


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0

Av

era

ge

Wa

ge

s /

Ho

ur

(Ja

pa

ne

se Y

en

)


1980 2011

...3 Labor inputs can be classified into four groups.

1) High skilled workers: university graduates

2) Middle-high skilled workers: college or high school graduates

3) Middle-low skilled workers: junior-high school graduates

4) Low skilled workers: part-time workers

* Self-employed workers are excluded because they are employer, not employee.

Kozo Kiyota

楕円

Kozo Kiyota

楕円

Kozo Kiyota

楕円

Kozo Kiyota

楕円



. . .Conclusion

. .Appendix

Methodology

We estimate the standard translog cost function:

Sijt = αij +J∑

s=1

αjs lnwijt +J∑

j=1

δjk ln xikt +R∑

r=1

αjrzirt

+dt + Tjt + µijt (1)

i = industry; j = variable factor; k = fixed factor; t = time.Sijt is the cost share of factor j ; wijt is the price of factor j ; xiktis fixed input or output k; zirt is technological change for proxyr .dt is time dummy; Tjt factor specific time trend; µijt is anerror term.

zirt includes ICT capital stock and offshoring.

We estimate the system of equations (for high, middle-high,middle-low, and low skilled workers), by Seemingly UnrelatedRegression (SUR) model.




. . .Conclusion

. .Appendix

Measurement of offshoring (Feenstra and Hanson, 1999,QJE)

SNO,it =

Oii ,t∑j=tradablesMijt

, (2)

where Oii ,t stands for imported intermediate inputs in industry i inyear t only; and Mijt is intermediate inputs from industry i toindustry j in year t.


Table 5. Elasticities

Table 6. Factor Demand and Other Elasticities, 1980-2011: Baseline Results

LH LMH LML LL M

Wage -0.296 -0.596*** -1.726*** -0.501** -0.137***

(0.218) (0.167) (0.484) (0.254) (0.011)

Offshoring 0.880** 0.257 -0.294 0.836 -0.089

(0.374) (0.298) (0.603) (0.616) (0.062)

ICT capital -0.038 0.108*** -0.245*** 0.229*** -0.003

(0.034) (0.027) (0.056) (0.057) (0.006)

...1 The offshoring has significantly positive effects on the demand for high skilledworkers.

→ The effect of offshoring on the demand for low, middle-low, and middle-highskilled workers is insignificant.

→ The offshoring is not harmful for workers although only high skilled workers canhave benefit from it.

Kozo Kiyota

長方形

Table 5. Elasticities

Table 6. Factor Demand and Other Elasticities, 1980-2011: Baseline Results

LH LMH LML LL M

Wage -0.296 -0.596*** -1.726*** -0.501** -0.137***

(0.218) (0.167) (0.484) (0.254) (0.011)

Offshoring 0.880** 0.257 -0.294 0.836 -0.089

(0.374) (0.298) (0.603) (0.616) (0.062)

ICT capital -0.038 0.108*** -0.245*** 0.229*** -0.003

(0.034) (0.027) (0.056) (0.057) (0.006)

...2 The effect of the ICT capital on the demand for middle-high, middle-low, andlow skilled workers is significantly positive, significantly negative, andsignificantly positive, respectively.

→ ICT has different effects across skills: it complements the middle-high and lowskilled workers but substitutes for the middle-low skilled workers.

→ Industries with higher ICT stock shifted demand from middle-low skilled workersto middle-high and low skilled workers, which is consistent with ICT–based “jobpolarization” (Autor, 2015, JEP).

Kozo Kiyota

長方形

Summary

Major findings

Industries with higher ICT stock shifted demand frommiddle-low to middle-high and low skilled workers.

Offshoring is associated with the increasing demand for highskilled workers whereas it has insignificant effects on thedemand for middle-high, middle-low, and low skilled workers.

→ The increasing demand for low-wage part-time workers can beattributable to ICT in Japan.

→ The offshoring is not harmful for workers although only highskilled workers can have benefit from it.



. . .Conclusion

. .Appendix

Conclusion


Conclusion

What we did?

This paper examines the effects of information and communicationtechnology (ICT) and offshoring on the skill demand in Japanesemanufacturing.

Contribution

This paper focuses explicitly on the demand for low-wage part-timeworkers (i.e., low skilled workers).

Data

Industry-level data for the period 1980–2011.

Conclusion

Major findings

Industries with higher ICT stock shifted demand from middle-low tomiddle-high and low skilled workers.

Offshoring is associated with the increasing demand for high skilledworkers whereas it has insignificant effects on the demand formiddle-high, middle-low, and low skilled workers.

→ The increasing demand for low-wage part-time workers can beattributable to ICT in Japan.

→ The offshoring is not harmful for workers although only high skilledworkers can have benefit from it.

Implications

Both home and foreign countries can benefit from FDI if profitscome back from foreign to home.

It thus is important for China, Japan, and Korea to support profitrepatriation by foreign-owned firms as well as to promote outwardFDI.



. . .Conclusion

. .Appendix

Appendix


Table 3. Offshoring and ICT, 1980–2011Table 3. Offshoring and ICT, 1980-2011

Narrow Differential Broad

1980 0.021 0.053 0.074 0.024

1985 0.024 0.055 0.079 0.050

1990 0.030 0.061 0.091 0.071

1995 0.042 0.061 0.103 0.082

2000 0.047 0.078 0.124 0.104

2005 0.057 0.097 0.154 0.127

2011 0.053 0.110 0.163 0.150

Offshoring ICT capital

share

Both narrow and broad offshoring increased steadily from 1980 to 2011.

→ The importance of offshoring is increasing from the mid-1980s.

The share of the ICT capital stock to total capital stock increased rapidly.

ict, offshoring, and the demand for part-time workers: the

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