Research

Abstract: Large exchange rate appreciations pose a fundamental challenge for open economies: they compress export margins, weaken competitiveness, and force firms and regions to adjust their production and employment structures. However, evidence on how such adjustments unfold over the long run remains limited. This paper studies these mechanisms using Japan’s sharp yen appreciation following the 1985 Plaza Accord. Combining a firm-level panel data from 1980 to 1999 with industry-level shock exposure, I estimate how appreciation affected firms’ employment, sales, and labor productivity. The results show sharp declines in sales and productivity but modest employment losses, reflecting Japan's rigid labor practices. Industries more exposed to export shocks expanded FDI in Asia, stabilizing domestic employment but lowering labor productivity. At the regional level, labor reallocation from manufacturing to services occurred in shock-exposed regions, suggesting that the yen appreciation led to gradual structural transformation.

Abstract: Why do elite families often maintain their social and economic status across generations? Using a unique historical setting from prewar Japan, we show that adoption played a crucial role in sustaining elite status. Yet, families’ preference for adopted heirs introduces selection bias in heir choice, likely biasing OLS estimates downward. To address this concern, we instrument the adoption decision with the gender of the firstborn child. Our results indicate that having an adopted heir increases the likelihood of maintaining elite status in the son’s generation by 27% relative to having a biological heir. We further show that this effect is driven by the strategic matching of high-quality adopted sons with fathers who achieved early-life success.