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The Path to Higher Growth: Does Revamping Japan’s Dual Labor Market Matter?

  • Chie Aoyagi
  • Giovanni Ganelli

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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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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  1. SUNADA Mitsuru & HIGUCHI Yoshio & ABE Masahiro, 2004. "The Impact of Computerization on Regular Employment (Japanese)," Discussion Papers (Japanese) 04043, Research Institute of Economy, Trade and Industry (RIETI).
  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 87/2011, Università di Perugia, Dipartimento Economia.
  3. ASANO Hirokatsu & ITO Takahiro & KAWAGUCHI Daiji, 2011. "Why Has the Fraction of Contingent Workers Increased? A case study of Japan," Discussion papers 11021, Research Institute of Economy, Trade and Industry (RIETI).
  4. Juan Jóse Dolado & Salvador Ortigueira & Rodolfo Stucchi, 2011. "Does dual employment protection affect TFP? Evidence from Spanish manufacturing firms," Economics Working Papers we1137, Universidad Carlos III, Departamento de Economía.
  5. Kyoji Fukao & Ryo Kambayashi & Daiji Kawaguchi & Hyeog Ug Kwon & Young Gak Kim & Izumi Yokoyama, 2006. "Deferred Compensation: Evidence from Employer-Employee Matched Data from Japan," Hi-Stat Discussion Paper Series d06-187, Institute of Economic Research, Hitotsubashi University.
  6. OHTAKE Fumio & OKUDAIRA Hiroko & KUME Koichi & TSURU Kotaro, 2011. "Life and Employment of Temporary Workers: Evidence from RIETI survey (Japanese)," Discussion Papers (Japanese) 11050, Research Institute of Economy, Trade and Industry (RIETI).
  7. KUME Koichi & OHTAKE Fumio & OKUDAIRA Hiroko & TSURU Kotaro, 2011. "An Empirical Analysis on the Happiness of Japanese Non-Regular Workers (Japanese)," Discussion Papers (Japanese) 11061, Research Institute of Economy, Trade and Industry (RIETI).
  8. 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.
  9. Andrei A. Levchenko & Julian di Giovanni, 2008. "Trade Openness and Volatility," IMF Working Papers 08/146, International Monetary Fund.
  10. MACHIKITA Tomohiro & SATO Hitoshi, 2011. "Temporary Jobs and Globalization: Evidence from Japan," Discussion papers 11029, Research Institute of Economy, Trade and Industry (RIETI).
  11. 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 gd09-074, Institute of Economic Research, Hitotsubashi University.
  12. KUME Koichi & OHTAKE Fumio & OKUDAIRA Hiroko & TSURU Kotaro, 2010. "Measuring Social Exclusion of Non Regular Workers in Japan (Japanese)," Discussion Papers (Japanese) 10025, Research Institute of Economy, Trade and Industry (RIETI).
  13. 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.
  14. "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, vol. 58(1), pages 61-90, January.
  15. Federica Origo & Laura Pagani, 2008. "Flexicurity and Workers Well-Being in Europe: Is Temporary Employment Always Bad?," Working Papers 141, University of Milano-Bicocca, Department of Economics, revised Jun 2008.
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