The fading 1990s in Japan: Driving forces behind the unemployment upsurge (with Hector Sala)
This draft: March 19th, 2008 (pdf)
Published: International Review of Economics and Finance, 2009, vol. 18, no. 3, 428-439
doi: http://dx.doi.org/10.1016/j.iref.2008.09.005
Abstract
This paper sheds new light on the causes of the unemployment upsurge in Japan during the “fading 1990s”, an unprecedented period of structural crisis. We estimate a labor market model and identify the main macroeconomic determinants of labor demand and labor supply decisions in the last decades. We then conduct dynamic simulations and assess the relative contribution of these determinants to the evolution of unemployment from 1990 to 2002. Beyond the leading role exerted by the decline in productivity growth, we find the active and expansionary measures undertaken by the government had an overall negative effect on the labor market.
Keywords: Japan, unemployment, productivity, macroeconomic policies, chain reaction theory
JEL Classification: E24, E60, J01


Unemployment in Japan: A look at the lost decade (with Hector Sala)
This draft: September 2nd, 2008 (pdf)
Published: Asia Pacific Journal of Economics and Business, 2008, vol. 12, no. 1, 16-35
Abstract
The ‘lost decade’ in Japan was a period of steep surge in unemployment. It started in 1991 with the unemployment rate at 2.1%, and ended in 2002 when it reached a historical maximum of 5.5%. To assess the main causes of this rise we take a macroeconomic perspective and estimate a reduced-form unemployment model. This model, containing a rich set of variables, yields an interesting picture. The fall of private investment played the main role, while private consumption and the boost in government spending partially offset this recessive effect. In turn, the initial rise in participation rates and the East Asian crisis after 1997 added new burdens to the labor market. We conclude that a crucial issue in the medium-run is to avoid the consequences of the prolonged decline in investment in terms of reduced productivity growth and a weaker international trade performance.
Keywords: Unemployment, reduced-form models, investment, economic policy, East Asian crisis
JEL Classification: E24, F16, J01


Offshoring: Facts and numbers at the country level (with Joan Enric Ricart)
This draft: September 4th, 2009 (pdf)
IESE working paper 792 (earlier draft)
Abstract
Offshoring has lately received wide attention. Its potential effects, mainly to be materialized in employment and productivity dislocations, are yet to be fully assessed. However, some consensus has been attained as to how to proxy its theoretical definition at an aggregate level. Here we review the most conventional indices the economic literature has so far produced, and employ them to provide an overview of the extent of the phenomenon for a group of countries. Contrary to common beliefs, our data reveal that offshoring is not exclusive of large developed economies. Further, we highlight the continuing prominence of the manufacturing over the services sector, and observe that while services offshoring is on the rise, it still represents a small fraction of total offshoring.
Keywords: offshoring, intermediate trade, aggregate data
JEL Classification: F14, F40


Japan and her dealings with offshoring: An empirical analysis with aggregate data
[JOB MARKET PAPER]
This draft: October 26th, 2009 (pdf)
IESE working paper 793 (earlier draft)
Abstract
First moves towards a real understanding of offshoring date back to very recent times, with employment and productivity effects occupying much of the literature around the subject. In particular for Japan, the studies conducted so far focus on the disaggregate level and put the stress on the productivity side alone. Here I carry out both the analyses of the employment and productivity effects at the aggregate level of the industry, covering the years 1980-2005. Moreover, I consider all industries within the economy and take account of both materials and services offshoring. My results suggest that we should expect, on average, a positive effect of services offshoring and a negative effect of materials offshoring on employment. However, the effects are rather negligible and only amount to a 1.5 to 2 percent loss of the change in employment. On the other hand, positive effects on the growth rate of productivity are found as a result of both types of offshoring, with larger effects from services. In particular, the average offshoring industry has higher productivity growth rates: 1.4 to 1.98 additional percentage points for services and 0.48 to 0.64 for materials.
Keywords: offshoring, Japan, employment, productivity
JEL Classification: F16, J23, O47


Employment effects of offshoring. An application to Japanese industries, 1980-2005
This draft: September 28th, 2009 (pdf)
Abstract
This paper estimates the direct effects of materials and services offshoring on Japanese employment. My main finding is that the net amount of jobs lost to offshoring during the past two and a half decades is negligible, as it was the role of offshoring as a source of sector-bias change in an era of major structural changes for Japan. I argue that, as a natural result of trade and profit-seeking, the positive and negative forces entailed in the relocation of activities worldwide tend to compensate each other. My estimations indicate a total net loss of approximately 25,000 jobs during 1980-2005. This is a rather non-significant figure when compared to the 9.5 million jobs created in the same period. Further, the evidence presented here hints at the possibility of skill upgrading only as a result of services offshoring.
Keywords: offshoring, employment, Japan, deindustrialization
JEL Classification: F16, J23


The Japanese lost decade and beyond: A chain reaction theory approach
This draft: February 18th, 2010 (pdf)
Abstract
The Japanese lost decade has become an intriguing puzzle for both economists and policy-makers alike, as the unemployment rate climbed to unprecedented levels and the growth rate of productivity decreased considerably. More recent times seem to present with a more optimistic outlook, but this is not yet the last word in the matter. In this paper we estimate two alternative multi-equation structural models descriptive of the Japanese labor market, that are then used to conduct dynamic simulations both for the lost decade period (1990-2002) and beyond (2002-2007). Our results point, primarily, to the damaging effects of the ever-increasing public debt as a major source of labor market inefficiencies. In addition, we find the fall in labor union power to have a significant easing effect on the unemployment rate, but also to be a major driver in the apparently eroding pattern of the labor income share in recent years.
Keywords: labor market dynamics, structural multi-equation models, chain reaction theory, simulations
JEL Classification: C32, E17, E24, J08