Advanced Search
MyIDEAS: Login

Labor adjustment, productivity and output volatility: An evaluation of Japan's Employment Adjustment Subsidy

Contents:

Author Info

  • Griffin, Naomi N.

Abstract

This paper provides a quantitative examination of the impact of Japan's Employment Adjustment Subsidy, a major employment insurance policy since 1975, on labor adjustment, productivity and output fluctuation in the iron and steel sector. A partial equilibrium industry model with heterogeneous establishments and aggregate uncertainty shows that the EAS reduces steady-state labor productivity by encouraging labor hoarding, and in some cases, preventing the exit of least efficient establishments. The EAS also reduces job flows and increases average establishment-level employment. Although the impact on productivity is roughly proportional to the size of subsidized workers in most cases, the effects of the subsidy on output and employment volatility are more than proportional. First, the subsidy can lead to a sizable increase in output fluctuations over business cycles by symmetrically increasing the output response to shocks. This result is achieved through lower output via a subsidy during unfavorable times and higher output via less time and money spent on hiring during favorable times. Second, the subsidy meets its primary objective of reduced employment volatility. The reduction can be considerable when firing costs are high.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6WMC-4XVC4N8-2/2/fc71544d6fd14d2a7d635c6f3d9cdc68
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 24 (2010)
Issue (Month): 1 (March)
Pages: 28-49

as in new window
Handle: RePEc:eee:jjieco:v:24:y:2010:i:1:p:28-49

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622903

Related research

Keywords: Employment policy Productivity Output volatility Business cycle Job creation and destruction;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Bertola, Giuseppe & Rogerson, Richard, 1996. "Institutions and Labour Reallocation," CEPR Discussion Papers 1519, C.E.P.R. Discussion Papers.
  2. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics.
  3. Anderson, Patricia M & Meyer, Bruce D, 1993. "Unemployment Insurance in the United States: Layoff Incentives and Cross Subsidies," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages S70-95, January.
  4. John G. Fernald & Susanto Basu, 1999. "Why is productivity procyclical? Why do we care?," International Finance Discussion Papers 638, Board of Governors of the Federal Reserve System (U.S.).
  5. Hashimoto, Mansanori, 1993. "Aspects of Labor Market Adjustments in Japan," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 136-61, January.
  6. Jeffrey R. Campbell & Jonas D.M. Fisher, 1996. "Aggregate employment fluctuations with microeconomic asymmetries," Discussion Paper / Institute for Empirical Macroeconomics 112, Federal Reserve Bank of Minneapolis.
  7. Steven J. Davis & John Haltiwanger, 1996. "On the Driving Forces Behind Cyclical Movement, in Employment and Job Reallocation," NBER Working Papers 5775, National Bureau of Economic Research, Inc.
  8. Susanto Basu & Miles S. Kimball, 1997. "Cyclical Productivity with Unobserved Input Variation," NBER Working Papers 5915, National Bureau of Economic Research, Inc.
  9. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  10. Russell W. Cooper & John C. Haltiwanger, 2000. "On the Nature of Capital Adjustment Costs," NBER Working Papers 7925, National Bureau of Economic Research, Inc.
  11. Feldstein, Martin S, 1978. "The Effect of Unemployment Insurance on Temporary Layoff Unemployment," American Economic Review, American Economic Association, vol. 68(5), pages 834-46, December.
  12. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
  13. Foster, Lucia & Haltiwanger, John C. & Syverson, Chad, 2005. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," IZA Discussion Papers 1705, Institute for the Study of Labor (IZA).
  14. Mincer, Jacob & Higuchi, Yoshio, 1988. "Wage structures and labor turnover in the United States and Japan," Journal of the Japanese and International Economies, Elsevier, vol. 2(2), pages 97-133, June.
  15. Jeffrey R. Campbell & Jonas D.M.Fisher, 2000. "Idiosyncratic Risk and Aggregate Employment Dynamics," NBER Working Papers 7936, National Bureau of Economic Research, Inc.
  16. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
  17. Davis, Steven J & Haltiwanger, John C, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 819-63, August.
  18. Feldstein, Martin S, 1976. "Temporary Layoffs in the Theory of Unemployment," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 937-57, October.
  19. Fumio Hayashi & Edward C. Prescott, 2000. "The 1990s in Japan: a lost decade," Working Papers 607, Federal Reserve Bank of Minneapolis.
  20. Steven J. Davis & John Haltiwanger, 1990. "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 123-186 National Bureau of Economic Research, Inc.
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 in new window

Cited by:
  1. Naomi N. Griffin & Kazuhiko Odaki, 2006. "Reallocation and Productivity Growth in Japan: Revisiting the Lost Decade of the 1990s: Working Paper 2006-02," Working Papers 17603, Congressional Budget Office.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:jjieco:v:24:y:2010:i:1:p:28-49. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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