The Impact of Demand Shock on the Employment of Temporary Agency Workers: Evidence from Japan During the Global Financial Crisis

Seoul Journal of Economics 28 (No. 3 2015): 265-284

20 Pages Posted: 28 Aug 2015

See all articles by Kaoru Hosono

Kaoru Hosono

Gakushuin University - Economics

Miho Takizawa

Toyo University

Kotaro Tsuru

Research Institute of Economy, Trade and Industry (RIETI)

Date Written: August 30, 2015

Abstract

This study investigates the effect of a negative demand shock on the composition of worker types at firms and examines the change in the share of temporary agency workers. The 2007-2009 global financial crisis is used as the natural experiment to clearly identify the causal link between the demand encountered by a firm and the composition of its workforce in terms of worker types, as well as to rule out any reverse causation. The decrease in demand experienced by Japanese exporting firms is adopted as the exogenous demand shock. Results indicate that compared with other firms, those with higher export ratio, lower liquid asset ratio, higher share of temporary agency workers, larger increase in the share of temporary agency worker ratio, and lower volatility in their sales prior to the crisis decreased their share of temporary agency workers in response to the demand shock. The quantitative effects of these pre-crisis firm characteristics are all economically significant. These results suggest that temporary agency workers serve as a buffer to demand shocks, and liquid assets work as a substitute for temporary agency workers.

Keywords: Demand shock, Temporary agency worker, Employment adjustment

JEL Classification: J21, J23, E24

Suggested Citation

Hosono, Kaoru and Takizawa, Miho and Tsuru, Kotaro, The Impact of Demand Shock on the Employment of Temporary Agency Workers: Evidence from Japan During the Global Financial Crisis (August 30, 2015). Seoul Journal of Economics 28 (No. 3 2015): 265-284. Available at SSRN: https://ssrn.com/abstract=2652572

Kaoru Hosono (Contact Author)

Gakushuin University - Economics ( email )

1-5-1 Mejiro, Toshima-ku
Tokyo 171-8588
Japan

Miho Takizawa

Toyo University ( email )

5-28-20 Hakusan
Bunkyo-ku
Tokyo 112-8606, Tokyo 1128606
Japan

Kotaro Tsuru

Research Institute of Economy, Trade and Industry (RIETI) ( email )

1-3-1 Kasumigaseki
Chiyoda-ku
Tokyo 100-8901
Japan

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