HAPRI SEMINAR: Demographic Aging, Task Allocation, and Foreign Labor Demand

Introduction:

The seminar examines how shifts in the age composition of a country's own workforce shape its demand for foreign labor. The research develops a task-based model in which firms allocate younger and experienced domestic workers across production and managerial tasks, so that foreign labor demand depends on the relative size of each cohort and on how task-intensive the work is. Foreign labor substitutes for younger workers where production tasks are younger-labor-intensive, but experienced workers are still required to sustain organizational capacity.

Using Japanese prefectural panel data together with instrumental variable evidence, the study finds that regions with sharper declines in younger workers and a more stable supply of experienced workers receive larger inflows of foreign labor. The estimates imply a demographic break-even condition: demand for foreign labor weakens once the contraction in experienced workers becomes large enough relative to…