International Fragmentation of Production

`Nobuaki Yamashita's book on international fragmentation of production combines theoretical analysis of outsourcing with painstaking empirical work. It is a welcome addition to one of the most rapidly advancing areas of international economics. It is likely to become a standard reference.'
- Henryk Kierzkowski, Graduate Institute of International Studies, Geneva, Switzerland

`Japanese firms are major players in East Asian production supply chains, by outsourcing labour-intensive parts of the production process to nearby low-wage economies (production fragmentation). This excellent empirical study first uses new databases to contrast fragmentation trade pattern and labour market adjustment between Japanese and US firms. It finds that outsourcing leads to increases in the skill of Japanese manufacturing workers and, more importantly, that it did not hurt overall Japanese employment and possibly even helped. This is an important contribution to our understanding of East Asian regional production networks and Japan's trade patterns.'
- Hugh Patrick, Columbia Business School, US

Using state-of-the-art econometric tools, this book examines the implications of international fragmentation of production for the performance of the Japanese manufacturing industry.

The impact of the ongoing process of international fragmentation of production and outsourcing has become a highly contentious issue in developed economies such as the US and Japan. Concerns about deindustrialisation and large-scale job losses - `the export of jobs' have generated a political backlash against multinationals and globalisation. Using detailed data from Japanese multinationals this book rigorously analyses the Japanese experience and compares and contrasts it with the experience of US manufacturing. The study finds no empirical evidence that expansion of multinational activities in foreign countries produces job losses in the home country. Indeed, when demand induced indirect employment effects are taken into account the increased profitability of Japanese firms is likely to have increased overall employment in Japan. However, the shift of labour intensive activities to low wage economies associated with the international fragmentation of production generates adjustment pressures and a structural shift in favour of skilled workers in Japanese manufacturing.

Being the first book to examine the impact of international outsourcing on the Japanese economy, this will be an excellent resource tool for scholars in the field of international economics as well as postgraduate students in international business and economics.