Temporary jobs and globalization : evidence from Japan

Since the 1990s, there has been a rapid increase in the proportion of temporary workers in the Japanese workforce. This paper empirically explores a linkage between the shift from permanent to temporary workers in the Japanese manufacturing sector and economic globalization, using various industry level data. We find that FDI and/or outsourcing tend to encourage the replacement of permanent workers with temporary workers in home production. In addition, we find that industries with higher exports are the most aggressive in replacing permanent workers with temporary workers. However, some other measures of global market competition such as world share of value added are not always statistically significant. Our estimation suggests that the impact of these globalization channels is sizable relative to the impact of the Worker Dispatching Act in 2004.