Foreign Ownership, Human Capital and Earnings in the Japanese Labour Market

The main purpose of this chapter is to investigate the differences in the distribution of human capital and the structure of earnings between workers in domestic firms and foreign-owned firms in Japan. The main question of interest is: Do foreign firms pay more than local firms in Japan? If so, why? Empirical studies in this area remain surprisingly few, and research opportunities remain vast. Our research focus on Japan is of considerable value in light of the so-called unique features of the Japanese labour market such as seniority, lifetime employment, and high degrees of gender segregation. We perform detailed econometric analysis using individual-level data in order to estimate the earnings premium associated with employment in foreign-owned firms. We also examine similarities and differences in the determinants of earnings between workers in domestic and foreign firms. The current research will advance our understanding of the operations of foreign multinationals in Japan, and add further empirical support to an area more deserving of evidence.