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Innovation and Employment Growth in Japan: Analysis Based on Microdata from the Basic Survey of Japanese Business Structure and Activities

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  • Kyoji Fukao
  • Kenta Ikeuchi
  • Young Gak Kim
  • Hyeog Ug Kwon

Abstract

This study, using microdata from the Basic Survey of Japanese Business Structure and Activities, empirically examines the relationship among innovation, labour hoarding and employment growth at Japanese firms from 1991 to 2010. The main findings are as follows. First, the labour force of many firms in Japan is above the optimal level (labour hoarding). Second, labour hoarding is more serious among larger firms. Third, firms do not adjust employment instantaneously; if they have surplus labour in the current period, they will gradually reduce it. This is consistent with the theoretical model on employment adjustment that we propose. Fourth, all else being equal, firms’ conducting R&D are more likely to increase employment. Fifth, while we observe a negative correlation between firms’ total factor productivity growth and employment, total factor productivity growth through innovation has a positive impact on employment. Finally, in the manufacturing sector, product innovation, which we proxy by R&D expenditure, has a positive impact on employment, while in the nonmanufacturing sector, process innovation, which we proxy by capital investment, has a positive effect on employment.
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Suggested Citation

  • Kyoji Fukao & Kenta Ikeuchi & Young Gak Kim & Hyeog Ug Kwon, 2017. "Innovation and Employment Growth in Japan: Analysis Based on Microdata from the Basic Survey of Japanese Business Structure and Activities," The Japanese Economic Review, Japanese Economic Association, vol. 68(2), pages 200-216, June.
    • Handle: RePEc:bla:jecrev:v:68:y:2017:i:2:p:200-216
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    File URL: http://hdl.handle.net/10.1111/jere.12146
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    Cited by:

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    2. Ibrahim Mike Okumu & Edward Bbaale & Madina Mwagale Guloba, 2019. "Innovation and employment growth: evidence from manufacturing firms in Africa," Journal of Innovation and Entrepreneurship, Springer, vol. 8(1), pages 1-27, December.
    3. Blessing Atwine & Ibrahim Mike Okumu & John Bosco Nnyanzi, 2023. "What drives the dynamics of employment growth in firms? Evidence from East Africa," Journal of Innovation and Entrepreneurship, Springer, vol. 12(1), pages 1-25, December.
    4. Hideki Nakamura & Joseph Zeira, 2024. "Automation and unemployment: help is on the way," Journal of Economic Growth, Springer, vol. 29(2), pages 215-250, June.
    5. Dam Duc Le, 2023. "Gthe Impact Of Technological Innovation On Labor Structure: Evidence From Vietnam Smes," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 26(2), pages 251-288, May.
    6. Imran Hussain Shah & Konstantinos Kollydas & Pak Yee Lee & Issam Malki & Crystal Chu, 2024. "Does R&D investment drive employment growth? Empirical evidence at industry level from Japan," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 102-118, January.

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    More about this item

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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