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The Path to Higher Growth

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Author Info

  • Chie Aoyagi
  • 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.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/202.

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Length: 26
Date of creation: 01 Oct 2013
Date of revision:
Handle: RePEc:imf:imfwpa:13/202

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Related research

Keywords: Labor markets; Japan; Employment policy; Economic growth; Labor productivity; Labor market reforms; dual labor market;

This paper has been announced in the following NEP Reports:

References

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  1. 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.
  2. Mirella Damiani & Fabrizio Pompei & Andrea Ricci, 2011. "Temporary job protection and productivity growth in EU economies," Quaderni del Dipartimento di Economia, Finanza e Statistica, Università di Perugia, Dipartimento Economia, Finanza e Statistica 87/2011, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  3. "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, Hitotsubashi University, vol. 58(1), pages 61-90, January.
  4. 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).
  5. KUME Koichi & OHTAKE Fumio & OKUDAIRA Hiroko & TSURU Kotaro, 2011. "An Empirical Analysis on the Happiness of Japanese Non-Regular Workers (Japanese)," Discussion Papers (Japanese), Research Institute of Economy, Trade and Industry (RIETI) 11061, Research Institute of Economy, Trade and Industry (RIETI).
  6. SUNADA Mitsuru & HIGUCHI Yoshio & ABE Masahiro, 2004. "The Impact of Computerization on Regular Employment (Japanese)," Discussion Papers (Japanese), Research Institute of Economy, Trade and Industry (RIETI) 04043, Research Institute of Economy, Trade and Industry (RIETI).
  7. 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.
  8. Ryo Kambayashi & Daiji Kawaguchi & Ken Yamada, 2009. "The Minimum Wage in a Deflationary Economy: The Japanese Experience, 1994|2003," Global COE Hi-Stat Discussion Paper Series, Institute of Economic Research, Hitotsubashi University gd09-074, Institute of Economic Research, Hitotsubashi University.
  9. Dolado, Juan J. & Ortigueira, Salvador & Stucchi, Rodolfo, 2012. "Does dual employment protection affect TFP? Evidence from Spanish manufacturing firms," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8763, C.E.P.R. Discussion Papers.
  10. MACHIKITA Tomohiro & SATO Hitoshi, 2011. "Temporary Jobs and Globalization: Evidence from Japan," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 11029, Research Institute of Economy, Trade and Industry (RIETI).
  11. OHTAKE Fumio & OKUDAIRA Hiroko & KUME Koichi & TSURU Kotaro, 2011. "Life and Employment of Temporary Workers: Evidence from RIETI survey (Japanese)," Discussion Papers (Japanese), Research Institute of Economy, Trade and Industry (RIETI) 11050, Research Institute of Economy, Trade and Industry (RIETI).
  12. KUME Koichi & OHTAKE Fumio & OKUDAIRA Hiroko & TSURU Kotaro, 2010. "Measuring Social Exclusion of Non Regular Workers in Japan (Japanese)," Discussion Papers (Japanese), Research Institute of Economy, Trade and Industry (RIETI) 10025, Research Institute of Economy, Trade and Industry (RIETI).
  13. Federica Origo & Laura Pagani, 2008. "Flexicurity and Workers Well-Being in Europe: Is Temporary Employment Always Bad?," Working Papers, University of Milano-Bicocca, Department of Economics 141, University of Milano-Bicocca, Department of Economics, revised Jun 2008.
  14. 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.
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