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The Evolution of Employment Relations in U.S. and Japanese Manufacturing Firms, 1900-1960: A Comparative Historical and Institutional Analysis

  • Chiaki Moriguchi

This paper offers a comparative study of the evolution of employment systems in the U.S. and Japan, using a game-theoretic framework in which an employment system is viewed as an equilibrium outcome of the strategic interactions among management, labor, and government. The paper identifies parallel institutional developments in large manufacturing firms in the U.S.and Japan during the first three decades of this century. In both countries, employment relations evolved from ones governed by simple, short-term contracts with individual bargaining toward employer paternalism' characterized by implicit, long-term contracts and company-wide employee representation.The paper then documents the subsequent processes of bifurcation. While Japan continued down the same path during the 1930s,the U.S. witnessed the breakdown of implicit contracts during the Great Depression, which eventually led to an endogenous hange in the legal framework. The paper describes how the two institutional paths further diverged during WWII under wartime regulations, and explains why Japan's trajectory did not converge to the American system despite the legal reforms in Japan under U.S. occupation. By the early 1960s, explicit, elaborate, and legally enforceable employment contracts and industrial unionism had developed in large U.S. manufacturing firms, whereas implicit, ambiguous, and self-enforcing employment contracts and enterprise unionism had emerged in their Japanese counterparts.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7939.

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Date of creation: Oct 2000
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Publication status: published as Moriguchi, Chiaki. "Implicit Contracts, The Great Depression, And Institutional Change: A Comparative Analysis Of U.S. And Japanese Employment Relations, 1920-1940," Journal of Economic History, 2003, v63(3,Sep), 625-665.
Handle: RePEc:nbr:nberwo:7939
Note: DAE LS
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  1. Okazaki Tetsuji, 1993. "The Japanese Firm under the Wartime Planned Economy," Journal of the Japanese and International Economies, Elsevier, vol. 7(2), pages 175-203, June.
  2. Paul A. David & Gavin Wright, 2005. "Early Twentieth Century Productivity Growth Dynamics: An Inquiry into the Economic History of “Our Ignorance”," Macroeconomics 0502023, EconWPA.
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  9. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 439-79, May.
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  11. Carmichael, H Lorne, 1984. "Reputations in the Labor Market," American Economic Review, American Economic Association, vol. 74(4), pages 713-25, September.
  12. Mincer, Jacob & Higuchi, Yoshio, 1988. "Wage structures and labor turnover in the United States and Japan," Journal of the Japanese and International Economies, Elsevier, vol. 2(2), pages 97-133, June.
  13. Raff, Daniel M G & Summers, Lawrence H, 1987. "Did Henry Ford Pay Efficiency Wages?," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages S57-86, October.
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