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Abstract

Vol. 56, No. 4, pp. 331-347 (2005)

“The Vertical Division of Labor and Japanese Outward FDI -Impacts on Human Capital Deepening in Japan-”
Keiko Ito (Faculty of Economics, Senshu University), Kyoji Fukao (The Institute of Economic Research, Hitotsubashi University)

This paper empirically examines the impact of recent changes in Japan's trade patterns on domestic factor markets. According to our factor content analysis, Japan's net exports changed in a direction that Japan has come to export more physical and human capital-intensive products over the past two decades. On the other hand, a major part of the macro-economics change in the capital-labor ratio and the change in the skilled-labor ratio can be attributed to a within-industry shift rather than a between-industry shift. Our empirical analysis provides evidence that the deepening of international devision of labor contributed to skill upgrading in Japan. Vertical intra-industry trade and outward FDI had a strong positive effect on the increase in the share of skilled workers.