2019 Reports

Offshoring and Working Hours Adjustments in a Within-firm Labor Market

Endoh, Masahiro

Although a growing body of literature identifies the within-firm redistribution effects of trade, research on the adjustment processes in within-firm labor markets is scarce. This study analyzes the within-firm adjustment of working hours and wages by considering workers’ educational background and gender in response to a change in offshoring. Matched worker–firm panel data in the Japanese manufacturing sector covering 1998 to 2013 are being used. The analysis leads to the following observations: First, offshoring does not significantly change monthly and annual incomes. Second, offshoring decreases working hours—that is, imported inputs are close substitutes for labor inputs. More than three-quarters of the decrease in scheduled working hours can be attributed to a decrease in working days. Third, hourly wages increase in all worker groups examined. Though the impacts of offshoring on hourly wages and incomes are contradictory, both share the same feature: offshoring expands neither skill premium nor gender gap.