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An Adjustment Cost Model of Long-Term Employment in Japan

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  • Nakamura, Shinichiro

Abstract

A dynamic factor demand model is presented which pays special attention to the prevalence of a long-term employment relationship in Japan. The model is based on the representation of technology by a variable cost function with adjustment costs for employment and capital stock, where the variable cost consists of the sum of overtime costs and materials costs. With employment being quasi-fixed and scheduled hours institutionally regulated, short-run adjustments are mostly made by overtime hours. Application to a time-series data on the Japanese electrical machinery industry indicates quasi-fixity of capital and employment and reproduces short-run overshooting of overtime hours to compensate for the sluggish adjustment of employment. Copyright 1993 by John Wiley & Sons, Ltd.

Suggested Citation

  • Nakamura, Shinichiro, 1993. "An Adjustment Cost Model of Long-Term Employment in Japan," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(2), pages 175-194, April-Jun.
    • Handle: RePEc:jae:japmet:v:8:y:1993:i:2:p:175-94
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    Cited by:

    1. Kiyohiko G. Nishimura & Takanobu Nakajima & Kozo Kiyota, 2005. "Innovation Versus Diffusion: Determinants of Productivity Growth Among Japanese Firms," CIRJE F-Series CIRJE-F-350, CIRJE, Faculty of Economics, University of Tokyo.
    2. Huang, Li-Hsuan, 2001. "Was higher education a quasi-fixed factor for firms in the 1980s?," Economics of Education Review, Elsevier, vol. 20(5), pages 495-501, October.

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