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Temporal changes in factor adjustment of the Japanese manufacturing industry

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  • Sangho Kim

Abstract

This study investigated temporal changes in factor adjustment of the Japanese manufacturing industry by applying a dynamic factor model, in which labor and capital were quasi-fixed to a panel of industries from 1972 to 2012. Estimations show that the adjustment speeds, with which factors approach their optimum levels, have increased over the period. Particularly, factor adjustment rates have significantly increased since 2000. The estimations suggest that Japanese manufacturers have become more flexible in hiring workers and faster in making investments, which reduces adjustment cost significantly. This dynamic gain is ignored from static analysis, underestimating the benefit of labor market reform. The study suggests that policymakers should consider dynamic factor adjustment in assessing policy impacts accurately when implementing an industrial policy.

Suggested Citation

  • Sangho Kim, 2022. "Temporal changes in factor adjustment of the Japanese manufacturing industry," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2122191-212, December.
  • Handle: RePEc:taf:oaefxx:v:10:y:2022:i:1:p:2122191
    DOI: 10.1080/23322039.2022.2122191
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    Cited by:

    1. Bing Zhou & Gong Zhang & Shulei Bi, 2023. "How Does Emissions Trading Affect the Efficiency of Enterprise Resource Allocation? Evidence From China," SAGE Open, , vol. 13(4), pages 21582440231, November.

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