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Accumulation of Human Capital and the Business Cycle

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  • Fukao, Kyoji
  • Otaki, Masayuki

Abstract

Characteristics of business cycles are quite different across developed countries. Real wages and working hours a re less sensitive to exogenous shocks in the United States than in Brit ain and Japan. Using a model with a microeconomic foundation, this paper provides an economic explanation of these differences. The cost of on-the-job training plays a crucial role. Workers seldom quit their jobs when the sunk training cost is high. In such economies, varianc es in employment and output become small and shocks tend to be absorbed by working hours and real wages. Thus, these characteristics do not necessarily indicate that the economy is more efficient. Copyright 1993 by University of Chicago Press.

Suggested Citation

  • Fukao, Kyoji & Otaki, Masayuki, 1993. "Accumulation of Human Capital and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 73-99, February.
    • Handle: RePEc:ucp:jpolec:v:101:y:1993:i:1:p:73-99
    DOI: 10.1086/261866
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    Cited by:

    1. Kawai, Eizo, 2001. "Re-examination of wage, employment, and hours adjustments: what is crucial for differences in the adjustments?," Japan and the World Economy, Elsevier, vol. 13(4), pages 483-497, December.
    2. Kyoji Fukao & Cristiano Perugini, 2021. "The Long‐Run Dynamics of the Labor Share in Japan," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(2), pages 445-480, June.
    3. Fabio Méndez & Facundo Sepúlveda, 2012. "The Cyclicality of Skill Acquisition: Evidence from Panel Data," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(3), pages 128-152, July.
    4. Shin-ichi Fukuda & Robert F. Owen, 2008. "Human Capital and Economic Growth: Dynamic Implications of Insider-outsider Problem for Macroeconomics," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 4(1), pages 133-158, December.
    5. Kozo Kiyota & Toshiyuki Matsuura, 2006. "Employment of MNEs in Japan: New Evidence," Discussion papers 06014, Research Institute of Economy, Trade and Industry (RIETI).
    6. Tsutomu Miyagawa & Miho Takizawa & Konomi Tonogi, 2017. "Can Intangible Investments Ease Declining Rates of Return on Capital in Japan?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 33, pages 114-127, Fall.

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