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Labor Adjustment, Productivity and Output Volatility: An Evaluation of Japan's Employment Adjustment Subsidy: Working Paper 2005-10

  • Naomi N. Griffin

This paper provides a theoretical examination of the impact of Japan’s Employment Adjustment Subsidy, a major employment insurance policy since 1975, on labor adjustment, productivity and output fluctuations 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, while reducing job flows and increasing average firm-level employment. While the directly measured impact on productivity is proportional to the fraction of subsidized

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Paper provided by Congressional Budget Office in its series Working Papers with number 17567.

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Date of creation: 02 Dec 2005
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Handle: RePEc:cbo:wpaper:17567
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