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Was the Barrier to Labor Mobility an Important Factor for the Prewar Japanese Stagnation?

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  • Aoki, Shuhei

Abstract

Using a simple framework, I reexamine the Hayashi and Prescott hypothesis (2006) that a barrier to labor mobility that maintained high agricultural employment was a cause of the stagnation in the prewar Japanese economy. I find that the labor misallocation between the agricultural and non-agricultural sectors had larger negative effects on the prewar Japanese aggregate productivity than on the postwar aggregate productivity. However, this is not because the wage differential between the sectors was larger but because the agricultural nominal share was larger in prewar Japan. Finally, I show that a model that does not assume a barrier to labor mobility can explain the change in the prewar and postwar agricultural employment rate and nominal share. These results suggest that factors other than labor misallocation are responsible for the stagnation in the prewar Japanese economy.

Suggested Citation

  • Aoki, Shuhei, 2008. "Was the Barrier to Labor Mobility an Important Factor for the Prewar Japanese Stagnation?," MPRA Paper 8178, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:8178
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    File URL: https://mpra.ub.uni-muenchen.de/8178/1/MPRA_paper_8178.pdf
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    References listed on IDEAS

    as
    1. Margarida Duarte & Diego Restuccia, 2010. "The Role of the Structural Transformation in Aggregate Productivity," The Quarterly Journal of Economics, Oxford University Press, vol. 125(1), pages 129-173.
    2. Restuccia, Diego & Yang, Dennis Tao & Zhu, Xiaodong, 2008. "Agriculture and aggregate productivity: A quantitative cross-country analysis," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 234-250, March.
    3. Laura Alfaro & Andrew Charlton & Fabio Kanczuk, 2009. "Plant-Size Distribution and Cross-Country Income Differences," NBER Chapters,in: NBER International Seminar on Macroeconomics 2008, pages 243-272 National Bureau of Economic Research, Inc.
    4. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1403-1448.
    5. Diewert, W Erwin, 1978. "Superlative Index Numbers and Consistency in Aggregation," Econometrica, Econometric Society, vol. 46(4), pages 883-900, July.
    6. Diego Restuccia & Richard Rogerson, 2008. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 707-720, October.
    7. Fumio Hayashi & Edward C. Prescott, 2008. "The Depressing Effect of Agricultural Institutions on the Prewar Japanese Economy," Journal of Political Economy, University of Chicago Press, vol. 116(4), pages 573-632, August.
    8. Gollin, Douglas & Parente, Stephen L. & Rogerson, Richard, 2007. "The food problem and the evolution of international income levels," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1230-1255, May.
    9. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," American Economic Review, American Economic Association, vol. 92(2), pages 160-164, May.
    10. John Laitner, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 545-561.
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    More about this item

    Keywords

    agriculture; barrier to labor mobility; prewar Japan; resource misallocation; two-sector model;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • N3 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy
    • N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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