IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2013-202.html
   My bibliography  Save this paper

The Path to Higher Growth: Does Revamping Japan’s Dual Labor Market Matter?

Author

Listed:
  • Ms. Chie Aoyagi
  • Mr. Giovanni Ganelli

Abstract

This paper argues that Japan’s excessive labor market duality can reduce Total Factor Productivity (TFP) due to a negative impact on non-regular workers’ effort and on firms’ incentives to train them. On the basis of cross-country empirical evidence, the paper proposes some reform options. In particular, our analysis suggests that reducing the difference in employment protection between regular and non-regular workers would substantially reduce labor market duality in Japan. One reform consistent with these findings is the introduction of a Single Open Ended Contract for all newly hired workers. This reform could be complemented by a shift towards a model that combines labor market flexibility and security (“flexicurity”) and by policies aimed at encouraging wage growth.

Suggested Citation

  • Ms. Chie Aoyagi & Mr. Giovanni Ganelli, 2013. "The Path to Higher Growth: Does Revamping Japan’s Dual Labor Market Matter?," IMF Working Papers 2013/202, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2013/202
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=40974
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gaston, Noel & Kishi, Tomoko, 2007. "Part-time workers doing full-time work in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 21(4), pages 435-454, December.
    2. Juan J. Dolado & Salvador Ortigueira & Rodolfo Stucchi, 2016. "Does dual employment protection affect TFP? Evidence from Spanish manufacturing firms," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 7(4), pages 421-459, November.
    3. Kambayashi, Ryo & Kawaguchi, Daiji & Yamada, Ken, 2013. "Minimum wage in a deflationary economy: The Japanese experience, 1994–2003," Labour Economics, Elsevier, vol. 24(C), pages 264-276.
    4. SUNADA Mitsuru & HIGUCHI Yoshio & ABE Masahiro, 2004. "The Impact of Computerization on Regular Employment (Japanese)," Discussion Papers (Japanese) 04043, Research Institute of Economy, Trade and Industry (RIETI).
    5. Luca NUNZIATA & Stefano STAFFOLANI, 2001. "On Short-term Contracts Regulations," Working Papers 150, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    6. Ariga, Kenn & Kurosawa, Masako & Ohtake, Fumio & Sasaki, Masaru & Yamane, Shoko, 2013. "Organization adjustments, job training and productivity: Evidence from Japanese automobile makers," Journal of the Japanese and International Economies, Elsevier, vol. 27(C), pages 1-34.
    7. Damiani, Mirella & Pompei, Fabrizio & Ricci, Andrea, 2011. "Temporary job protection and productivity growth in EU economies," MPRA Paper 29698, University Library of Munich, Germany.
    8. Kawaguchi, Daiji & Kwon, HyeogUg & Shimizutani, Satoshi & Fukao, Kyoji & Makino, Tatsuji & Yokoyama, Izumi & Kambayashi, Ryo & Kim, YoungGak, 2007. "Are Wage‐tenure Profiles Steeper than Productivity‐tenure Profiles?―Evidence from Japanese Establishment Data from the Census of Manufacturers and the Basic Survey Wage Structure―," Economic Review, Hitotsubashi University, vol. 58(1), pages 61-90, January.
    9. Randall S. Jones, 2007. "Income Inequality, Poverty and Social Spending in Japan," OECD Economics Department Working Papers 556, OECD Publishing.
    10. Federica Origo & Laura Pagani, 2008. "Flexicurity and Workers Well-Being in Europe: Is Temporary Employment Always Bad?," Working Papers 141, University of Milano-Bicocca, Department of Economics, revised Jun 2008.
    11. KUME Koichi & OHTAKE Fumio & OKUDAIRA Hiroko & TSURU Kotaro, 2011. "An Empirical Analysis on the Happiness of Japanese Non-Regular Workers (Japanese)," Discussion Papers (Japanese) 11061, Research Institute of Economy, Trade and Industry (RIETI).
    12. Julian di Giovanni & Andrei A. Levchenko, 2009. "Trade Openness and Volatility," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 558-585, August.
    13. OHTAKE Fumio & OKUDAIRA Hiroko & KUME Koichi & TSURU Kotaro, 2011. "Life and Employment of Temporary Workers: Evidence from RIETI survey (Japanese)," Discussion Papers (Japanese) 11050, Research Institute of Economy, Trade and Industry (RIETI).
    14. Ms. Florence Jaumotte, 2011. "The Spanish Labor Market in a Cross-Country Perspective," IMF Working Papers 2011/011, International Monetary Fund.
    15. Mr. Chad Steinberg & Mr. Masato Nakane, 2012. "Can Women Save Japan?," IMF Working Papers 2012/248, International Monetary Fund.
    16. KUME Koichi & OHTAKE Fumio & OKUDAIRA Hiroko & TSURU Kotaro, 2010. "Measuring Social Exclusion of Non Regular Workers in Japan (Japanese)," Discussion Papers (Japanese) 10025, Research Institute of Economy, Trade and Industry (RIETI).
    17. Hirokatsu Asano & Takahiro Ito & Daiji Kawaguchi, 2011. "Why Has the Fraction of Contingent Workers Increased? A Case Study of Japan," IDEC DP2 Series 1-3, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
    18. MACHIKITA Tomohiro & SATO Hitoshi, 2011. "Temporary Jobs and Globalization: Evidence from Japan," Discussion papers 11029, Research Institute of Economy, Trade and Industry (RIETI).
    19. Kyoji Fukao & Ryo Kambayashi & Daiji Kawaguchi & Hyeog Ug Kwon & Young Gak Kim & Izumi Yokoyama, 2006. "Deferred Compensation: Evidence from Employer-Employee Matched Data from Japan," Hi-Stat Discussion Paper Series d06-187, Institute of Economic Research, Hitotsubashi University.
    20. ASANO Hirokatsu & ITO Takahiro & KAWAGUCHI Daiji, 2011. "Why Has the Fraction of Contingent Workers Increased?: A case study of Japan (Japanese)," Discussion Papers (Japanese) 11051, Research Institute of Economy, Trade and Industry (RIETI).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Johanna Schauer, 2018. "Labor Market Duality in Korea," IMF Working Papers 2018/126, International Monetary Fund.
    2. Mariana Colacelli & Emilio Fernández Corugedo, 2018. "Macroeconomic Effects of Japan’s Demographics: Can Structural Reforms Reverse Them?," IMF Working Papers 2018/248, International Monetary Fund.
    3. Sangjun Jeong, 2017. "Biased Technical Change and Economic Growth: The Case of Korea, 1970–2013," Research in Political Economy, in: Return of Marxian Macro-Dynamics in East Asia, volume 32, pages 81-103, Emerald Group Publishing Limited.
    4. Miyamoto Hiroaki, 2016. "Growth and non-regular employment," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(2), pages 523-554, June.
    5. Fukao, Kyoji & Perugini, Cristiano & Pompei, Fabrizio, 2020. "Labour Market Institutions, Technology and Rent Sharing," IZA Discussion Papers 13155, Institute of Labor Economics (IZA).
    6. Sonali Jain-Chandra & Tidiane Kinda & Kalpana Kochhar & Shi Piao & Johanna Schauer, 2019. "Sharing the Growth Dividend: Analysis of Inequality in Asia," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 2(12), pages 5-28, September.
    7. Mai Dao & Davide Furceri & Jisoo Hwang & Meeyeon Kim & Tae-Jeong Kim, 2014. "Strategies for Reforming Korea's Labor Market to Foster Growth," Working Papers 2014-25, Economic Research Institute, Bank of Korea.
    8. Ms. Chie Aoyagi & Mr. Giovanni Ganelli & Nour Tawk, 2016. "Minimum Wage as a Wage Policy Tool in Japan," IMF Working Papers 2016/232, International Monetary Fund.
    9. Fructuoso Borrallo Egea & Pedro del Río López, 2021. "Monetary policy strategy and inflation in Japan," Occasional Papers 2116, Banco de España.
    10. Ms. Elif C Arbatli Saxegaard & Mr. Dennis P Botman & Kevin Clinton & Pietro Cova & Vitor Gaspar & Zoltan Jakab & Mr. Douglas Laxton & Mr. Constant A Lonkeng Ngouana & Mr. Joannes Mongardini & Hou Wang, 2016. "Reflating Japan: Time to Get Unconventional?," IMF Working Papers 2016/157, International Monetary Fund.
    11. Chie Aoyagi & Giovanni Ganelli & Kentaro Murayama, 2016. "How Inclusive is Abenomics?," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 1-28, February.
    12. Fukao, Kyoji & Perugini, Cristiano & Pompei, Fabrizio, 2022. "Labour market regimes, technology and rent-sharing in Japan," Economic Modelling, Elsevier, vol. 112(C).
    13. Kyoji Fukao & Cristiano Perugini & Fabrizio Pompei, 2023. "Non‐standard Employment and Rent‐sharing," Economica, London School of Economics and Political Science, vol. 90(357), pages 178-211, January.
    14. Kato, Masatoshi & Zhou, Haibo, 2018. "Numerical labor flexibility and innovation outcomes of start-up firms: A panel data analysis," Technovation, Elsevier, vol. 69(C), pages 15-27.
    15. Fructuoso Borrallo Egea & Pedro del Río López, 2021. "Estrategia de política monetaria e inflación en Japón," Occasional Papers 2116, Banco de España.
    16. Randall Jones & Yosuke Jin, 2017. "Boosting productivity for inclusive growth in Japan," OECD Economics Department Working Papers 1414, OECD Publishing.
    17. Izumi Yokoyama & Kazuhito Higa & Daiji Kawaguchi, 2018. "Adjustments of regular and non-regular workers to exogenous shocks: Evidence from exchange rate fluctuation," Bank of Japan Working Paper Series 18-E-2, Bank of Japan.
    18. Raihan, Selim, 2021. "Functional Income Distribution and Inequality in the Asia-Pacific Countries," MPRA Paper 110469, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aoyagi, Chie & Ganelli, Giovanni, 2015. "Does revamping Japan's dual labor market matter?," Economic Systems, Elsevier, vol. 39(2), pages 339-357.
    2. International Monetary Fund, 2013. "Japan: Selected Issues," IMF Staff Country Reports 2013/254, International Monetary Fund.
    3. Davide Porcellacchia, 2016. "Wage-Price Dynamics and Structural Reforms in Japan," IMF Working Papers 2016/020, International Monetary Fund.
    4. Mai Dao & Davide Furceri & Jisoo Hwang & Meeyeon Kim & Tae-Jeong Kim, 2014. "Strategies for Reforming Korea's Labor Market to Foster Growth," Working Papers 2014-25, Economic Research Institute, Bank of Korea.
    5. Mariana Colacelli & Emilio Fernández Corugedo, 2018. "Macroeconomic Effects of Japan’s Demographics: Can Structural Reforms Reverse Them?," IMF Working Papers 2018/248, International Monetary Fund.
    6. Machikita, Tomohiro & Sato, Hitoshi, 2016. "Temporary jobs and globalization," IDE Discussion Papers 585, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    7. MATSUURA Toshiyuki, 2013. "Why Did Manufacturing Firms Increase the Number of Non-regular Workers in the 2000s? Does international trade matter?," Discussion papers 13036, Research Institute of Economy, Trade and Industry (RIETI).
    8. Hirokatsu Asano & Takahiro Ito & Daiji Kawaguchi, 2011. "Why Has the Fraction of Contingent Workers Increased? A Case Study of Japan," IDEC DP2 Series 1-3, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
    9. International Monetary Fund, 2011. "Japan: Selected Issues," IMF Staff Country Reports 2011/182, International Monetary Fund.
    10. Tanaka, Ayumu, 2013. "The causal effects of exporting on domestic workers: A firm-level analysis using Japanese data," Japan and the World Economy, Elsevier, vol. 28(C), pages 13-23.
    11. Reiko Aoki, 2013. "A Demographic Perspective on Japan's “Lost Decades”," Population and Development Review, The Population Council, Inc., vol. 38, pages 103-112, February.
    12. TANAKA Ayumu, 2012. "The Causal Effects of Exporting on Japanese Workers: A firm-level analysis," Discussion papers 12017, Research Institute of Economy, Trade and Industry (RIETI).
    13. Chie Aoyagi & Giovanni Ganelli & Kentaro Murayama, 2016. "How Inclusive is Abenomics?," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 1-28, February.
    14. Kato, Takao,, 2016. "Productivity, wages and unions in Japan," ILO Working Papers 994904643402676, International Labour Organization.
    15. Manu, Ana-Simona, 2022. "How sectoral technical progress and factor substitution shaped Japan’s structural transformation?," Working Paper Series 2641, European Central Bank.
    16. HOSONO Kaoru & TAKIZAWA Miho & TSURU Kotaro, 2014. "The Impact of a Demand Shock on the Employment of Temporary Agency Workers: Evidence from Japan during the global financial crisis," Discussion papers 14046, Research Institute of Economy, Trade and Industry (RIETI).
    17. Esteban-Pretel, Julen & Fujimoto, Junichi, 2012. "Life-cycle search, match quality and Japan’s labor market," Journal of the Japanese and International Economies, Elsevier, vol. 26(3), pages 326-350.
    18. Kambayashi, Ryo & Kato, Takao, 2012. "Good Jobs, Bad Jobs, and the Great Recession: Lessons from Japan's Lost Decade," IZA Discussion Papers 6666, Institute of Labor Economics (IZA).
    19. Aoki, Reiko & 青木, 玲子, 2012. "Japan’s Demographics and the Lost Decades," CIS Discussion paper series 561, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    20. Laura Hospido & Eva Moreno-Galbis, 2015. "The Spanish productivity puzzle in the Great Recession," Working Papers 1501, Banco de España.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2013/202. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.