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Does revamping Japan's dual labor market matter?

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  • Aoyagi, Chie
  • Ganelli, Giovanni

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. The paper then empirically studies the determinants of labor market duality. The main result of the paper is that the level of employment protection affects duality. In particular, a higher level of employment protection of regular workers increases duality, while a higher level of protection of temporary workers reduces it. On the basis of this result, the paper also discusses some reform options to address Japan's labor market duality.

Suggested Citation

  • Aoyagi, Chie & Ganelli, Giovanni, 2015. "Does revamping Japan's dual labor market matter?," Economic Systems, Elsevier, vol. 39(2), pages 339-357.
    • Handle: RePEc:eee:ecosys:v:39:y:2015:i:2:p:339-357
    DOI: 10.1016/j.ecosys.2014.11.002
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    Cited by:

    1. Chen, W.D., 2018. "Upward wage rigidity and Japan's dispatched worker system," Economic Modelling, Elsevier, vol. 73(C), pages 152-162.
    2. Davide Porcellacchia, 2016. "Wage-Price Dynamics and Structural Reforms in Japan," IMF Working Papers 2016/020, International Monetary Fund.

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    More about this item

    Keywords

    Japan; Dual labor market; Labor market reform;
    All these keywords.

    JEL classification:

    • J00 - Labor and Demographic Economics - - General - - - General
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies

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