Labor Law Reform in Japan: A Response to Recent Socio-Economic Changes

TFP growth slowdown and the Japanese labor market in the 1990s

“…Therefore, there is no evidence of how much of the cyclical volatility of Japanese unemployment can be accounted for by technology shocks using the standard search and matching model. Second, since we are looking at medium term changes in the economy, and not at fluctuations around a steady state, we assume that over time, the flow value of unemployment also changes when productivity varies, as can be seen in equation (26). This assumption is consistent with the empirical evidence for Japan, where the replacement ratio decreased over the Lost Decade.…”

“…Finally, although not shown in the figures for the sake of brevity, we have performed an alternative simulation of the model without capital and using the appropriate measure of productivity 26 , and have found that the model accounts only for 10% of the change in unemployment by the year 2002. This provides further evidence for the premise that it is the existence of capital which is responsible for the better performance of our model compared to the basic textbook version.…”

“…However they are much more insensitive than in Shimer (2005) for the reasons explained above; our model therefore accounts for more than Shimer, but less than Hagedorn and Manovskii. 26 If capital is not present in the model, the empirically relevant measure of productivity is no longer TFP but output per unit of labor input, i.e.…”

Corporate Governance and Law Reform in Japan: From the Lost Decade to the End of History?

“…This also affects the resilience of lifelong employment as a core concept in the Japanese corporate world. Yamakawa (2001) still concludes that it will remain, albeit with some modifications. Data from various surveys supports such conclusions, although also often confirming a move towards performance-based remuneration.18 However, a problem with most of these surveys is that they question incumbents within firms.…”

Corporate Governance and Law Reform in Japan: From the Lost Decade to the End of History?

“…In addition, Yamakawa (2001) surveys major changes recently made to an array of labour legislation. These should cement in place or encourage broader transformations in the labour market in Japan, sometimes following changes in norms and/or underlying socio-economic institutions (as with takeovers : Milhaupt 2001) and sometimes rather prompting them (as with consumer bankruptcy reform: West 2003a).…”