Multinationals, Intrafirm Trade, and Employment Volatility
Keio University and RIETI
Keio University and KU Leuven
This paper examines the theoretically ambiguous relationship between the volatility of employment growth and the foreign exposure of a firm. We use unique firm-level data for Japan for the period 1994-2012, which allow us to examine the differences between 1) multinational firms, trading firms, and nontrading firms; 2) manufacturing and wholesale and retail trade; and 3) intrafirm and interfirm trade. One of the major findings is that, in manufacturing, the effect of exports on the volatility of employment varies depending on the share of intrafirm exports to total sales. In contrast, in wholesale and retail trade, exports do not have significant effects on
employment volatility. The results suggest that intrafirm trade transmits the effects of foreign demand and supply shocks differently between manufacturing and wholesale and retail trade.