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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.

Suggested Citation

  • SHINADA Naoki, 2011. "Quality of Labor, Capital, and Productivity Growth in Japan: Effects of employee age, seniority, and capital vintage," Discussion papers 11036, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:11036
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    File URL: https://www.rieti.go.jp/jp/publications/dp/11e036.pdf
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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 K. Hellerstein & David Neumark, 2007. "Production Function and Wage Equation Estimation with Heterogeneous Labor: Evidence from a New Matched Employer-Employee Data Set," NBER Chapters,in: Hard-to-Measure Goods and Services: Essays in Honor of Zvi Griliches, pages 31-71 National Bureau of Economic Research, Inc.
    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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