PUBLICATIONS & REPORTS

Contents Introduction

This essay is a non-technical summary of evidence from previous studies that examine the relationship between Japanese exports or the exports of Japanese multinational parent firms on the one hand and the economic activities of foreign affiliates of Japanese multinationals on the other. Although there are many possible definitions of hollowing out, one of the most common definitions refers to a process where the transfer of economic activities to foreign affiliates of multinationals leads to reduction of economic activities in home country and more specifically in the home country parents of those multinationals. The economic activity most directly affected is exports, and changes in exports can then lead to changes in production, employment, and so on. However, the empirical evidence summarized in this essay suggests that there is no negative relationship between economic activities of foreign affiliates and exports of Japanese parents or Japanese manufacturing exports. These results are generally consistent with previous results for Sweden and the United States, which suggest that activities of foreign affiliates usually stimulate or have no relationship to economic activity in the parent firm or home industry.