Trade and the Labor Market

Effect on Wage Inequality in Japan

verfasst von: Prof. Dr. Kojiro Sakurai

Verlag: Springer Singapore

Buchreihe : SpringerBriefs in Economics

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

This book presents an integrated overview and evidence, taking Japan as an example, on how international trade, especially with developing countries, affects labor market in developed countries, which has been keenly debated among international and labor economists since the late 1980s. The unique point of this book is that it integrates international trade and labor market into the same framework. The analysis includes both theory and empirical study. It especially pays attention to wage inequality between skilled and unskilled labor represented by nonproduction and production workers, and college graduates and high-school graduates. The estimation method used is to analyze input-output tables containing 55 manufacturing industries during the period 1995-2005, and to measure factor content of trade using these tables.
Main results are as follows: First, both relative wage and relative employment of nonproduction to production workers, and college graduates to high-school graduates increased as a trend since the 1980s, suggesting a relative demand shift toward skilled labor. Second, analysis using input-output tables revealed that employment reduction due to increased imports is greater in production workers than in nonproduction workers, and that employment increase due to increased exports is greater in nonproduction workers than in production workers, suggesting the comparative advantage being at work in line with the Heckscher-Ohlin-Samuelson model. Third, analysis using factor content of trade revealed that increased trade during 1995-2005 especially with Asian countries raised the relative wage of nonproduction to production workers in the aggregated manufacturing sector by 0.023 points (1.400 to 1.422), or by 1.6 percent in terms of rate of change. This estimation result suggests that increased trade in this period played a certain role in widening wage inequality between nonproduction to production workers. These results contribute to a deeper understanding of the effect of globalization on labor market in the field of economics.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Abstract

Widening wage inequality in the US and other developed countries in the West has been the focus of academic debates since the 1990s among economists, especially in the field of labor economics and international economics. Studies to date seem to have narrowed down the causes to two major factors: technological change and globalization. Since these factors are generally witnessed in the developed countries, they must have some potential impact on Japan. The objective of this book is to investigate how and to what extent international trade widens wage inequality in the Japanese manufacturing labor market, both theoretically and empirically. Specifically, the book estimates the effect of trade between 1995 and 2005 on the relative wages of skilled to unskilled labor, represented by nonproduction to production workers and college graduates to high school graduates, by calculating the factor content of trade of 55 or 20 manufacturing industries. The estimation reveals that trade was partly responsible for the widening wage inequality in the Japanese manufacturing labor market, although the effect of the trade was not dominant.

Kojiro Sakurai

Chapter 2. Basic Facts

Abstract

This chapter provides an overview of the long-term trends in the Japanese manufacturing labor market focusing on wage inequality between skilled and unskilled labor, and analyzes how the recent changes in Japan’s trade structure contributed to the widening wage inequality. The relative wage of skilled labor to unskilled labor, represented by nonproduction to production workers and college graduates to high school graduates in the manufacturing industry, has been steadily increasing since the 1980s accompanied by an increase in the relative employment of skilled labor to unskilled labor. Therefore, if we are to view these relative wages and employment in a simple supply-demand framework, it is safe to say that relative demand for skilled labor increased at least to the same extent, or more than relative supply. This chapter pays special attention to the recent changes in Japan’s trade structure as one of the important factors underlying this relative demand shift, and explains the mechanism of how increased trade, especially with Asian countries, widens wage inequality in Japan in a theoretical framework of the HOS model.

Kojiro Sakurai

Chapter 3. Effect of Trade on Employment

Abstract

This chapter analyzes the effect of increased trade between 1995 and 2005 on employment in 55 manufacturing industries based on input-output analysis, focusing on the quantitative impact on the number of workers with different skills. The effect of trade between 1995 and 2000, for example, is estimated as the difference between the actual employment and the counterfactual employment that would have been realized if trade had not changed after 1995 in terms of import ratio and export ratio. The analysis reveals that imports tend to increase in production labor-intensive industries and exports tend to increase in technical labor-intensive industries, implying that trade was consistent with the HOS model with skill intensity being an index of Japan’s comparative advantage. It also reveals that the negative effect of increased imports is larger on production workers than on nonproduction workers, whereas the positive effect of increased exports is larger on nonproduction workers than on production workers in the aggregated manufacturing industry, suggesting a non-neutral or biased effect of trade. It is derived from this result that trade during this period caused a relative demand shift toward skilled labor in the Japanese manufacturing labor market.

Kojiro Sakurai

Chapter 4. Effect of Trade on Wages

Abstract

In this chapter, the central part of this book, estimates the effect of exports and imports between 1995 and 2005 on the relative wage of skilled labor to unskilled labor, represented by nonproduction to production workers and college graduates to high school graduates, by calculating the factor content of trade of 55 or 20 manufacturing industries using input-output tables and other data sources. The effect of trade between 1995 and 2000, for example, is estimated as the difference between the actual relative wage and the hypothetical or counterfactual relative wage that would have been realized if trade had remained at the 1995 level. The estimation reveals that trade from 1995 to 2005 was partly responsible for the widening wage inequality between nonproduction and production workers, although the effect was not dominant. As for wage inequality between college graduates and high school graduates, the estimated effect of trade on the widening gap was very large for females, while it was not consistent with the comparative advantage I had assumed for males.

Kojiro Sakurai

Chapter 5. Concluding Remarks

Abstract

Many years have passed since the decline in the relative wages of unskilled labor to skilled labor in the US and other developed countries in the West captured the attention of academia, economists, and policy makers. Similar wage movements have been observed in the Japanese manufacturing labor market since the 1990s, although the degree of wage inequality is far less than that of the US and other developed countries. Our book shows that Japan in not an exception to the fact that increased trade in the 1990s and 2000s led to an increase in the relative demand for skilled labor, thereby expanding the wage inequality between skilled and unskilled labor. However, it should be noted that the analysis in this book, which is based on the traditional international trade theory of the HOS model, can only partly explain the whole mechanism of the widening wage inequality observed. This chapter summarizes the main findings of the book and addresses the remaining issues for further research.

Kojiro Sakurai

Titel: Trade and the Labor Market
verfasst von: Prof. Dr. Kojiro Sakurai
Verlag: Springer Singapore
Electronic ISBN: 978-981-10-5993-3
Print ISBN: 978-981-10-5992-6
DOI: https://doi.org/10.1007/978-981-10-5993-3