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Quality of Labor, Capital, and Productivity Growth in Japan: Effects of employee age, seniority, and capital vintage

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  • SHINADA Naoki

Abstract

An aging population, low fertility rate, and suppressed corporate investment have left Japan with an older workforce and older vintages of fixed capital. To restore economic dynamism, Japan must encourage productivity growth. Using panel data of listed Japanese firms in FY 1977-2008, this paper demonstrates how both employee age and capital vintage affect the quality of labor and capital that influence productivity. Our research contributes three significant findings. (1) The older the average age of a firm's employees or the longer their seniority, the higher the firm's productivity growth, but it is unclear if the effects peak at specific ages. (2) The positive effects of employees' increasing age and seniority and the negative effect of older capital on Japan's productivity growth have declined since the 1990s. (3) These effects have been larger among manufacturers than non-manufacturers. Negative effects of increasing non-regular workers should be addressed, and it is further important for Japanese firms to organize and manage labor skills and enhance knowledge, rather than depend on technology accumulated over time.

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Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11036.

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Length: 30 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:eti:dpaper:11036

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  1. Pekka Ilmakunnas & Mika Maliranta & Jari Vainiomäki, 2004. "The Roles of Employer and Employee Characteristics for Plant Productivity," Journal of Productivity Analysis, Springer, vol. 21(3), pages 249-276, May.
  2. Judith Hellerstein & David Neumark, 2004. "Production Function and Wage Equation Estimation with Heterogenous Labor: Evidence from a New Matched Employer-Employee Dataset," Working Papers 04-05, Center for Economic Studies, U.S. Census Bureau.
  3. Kamada, Koichiro & Masuda, Kazuto, 2001. "Effects of Measurement Error on the Output Gap in Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(2), pages 109-154, May.
  4. Plutarchos Sakellaris, 2001. "Production function estimation with industry capacity data," Finance and Economics Discussion Series 2001-06, Board of Governors of the Federal Reserve System (U.S.).
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