International Influences on Japanese Supply Chains

Abstract

This paper investigates the transmission mechanism of Chinese productivity shocks through industry-level and firm-level networks in the Japanese manufacturing sector using an instrumental variable approach. We find that increased Chinese productivity in a particular industry negatively affects Japanese suppliers of Japanese firms in that industry (upstream propagation) and positively affects their Japanese corporate customers (downstream propagation). This contrasts the recently studied case of the United States, which did not lead to evidence for downstream propagation of such shocks. RIETI Discussion Papers Series aims at widely disseminating research results in the form of professional papers, thereby stimulating lively discussion. The views expressed in the papers are solely those of the author(s), and neither represent those of the organization to which the author(s) belong(s) nor the Research Institute of Economy, Trade and Industry.

China's impact on regional employment: Propagation through input–output linkages and co‐location patterns

“…Since the estimated coefficients of the direct penetration are larger when accounting for the upstream and downstream measures compared to the simplest case, this means that ignoring this input-output linkage would underestimate the direct impact of import penetration. This is consistent with previous research finding a positive effect of inputs imported from China at the industry, firm and product levels Antràs et al, 2017, Fabinger et al, 2017, Hayakawa et al, 2021 and the finding by Taniguchi (2019) that intermediate imports may benefit Japanese manufacturers.…”

“…This paper is particularly related to the research on Japan within this literature. Our results are consistent with industry‐, firm‐ and product‐level analyses that report the positive effects on employment and firm performance more generally in the downstream industries (Fabinger et al, 2017; Hayakawa et al, 2021). Similar to this paper, Taniguchi's (2019) prefectural‐level study shows that between 1995 and 2007, imports from China had a positive impact on local employment in Japan, primarily because of intermediate goods imports.…”

“…In addition to the labour market consequences, the literature has examined the China Shock effects on: firm performance(Acemoglu, Akcigit et al, 2016;Fabinger et al, 2017); innovationBloom et al, 2016; Yamashita & Yamaguchi, 2020); political polarization and the rise of nationalism(Autor, Dorn, Hanson & Majlesi, 2020;Colantone & Stanig, 2018a, 2018b; and the marriage market and family structure(Autor, Dorn, & Hanson, 2019). However, these topics remain connected to labour markets because adverse economic shocks have political and social consequences, especially labour displacement, which further emphasizes the importance of the employment effect in a broader sense.4 Note that our long-term analysis focusses on the end state and does not focus on the labour market adjustment process itself, which is of particular interest in the recent literature (e.g Dix-Carneiro & Kovak, 2017)…”

Trade, value chains and labor markets in advanced economies

“…Positive downstream effects of Chinese imports have also been shown for Japanese firm sales (Fabinger et al, 2017).…”

Globalisation and its Economic Consequences

“…Inter-industry impact of globalization Ito and Ikeuchi (2017) Firms are more likely to shut down domestic establishments in more routine task-intensive industries after they became a multinational. Fabinger, Shibuya, and Taniguchi (2017) Imports from China have a negative effect on value added growth in upstream industries but a positive effect in downstream industries.…”