Abstract
The labor share in Japan has been declining significantly over the last three decades, accompanied by persistent stagnation and an unprecedented increase in economic inequalities. Since these dynamics are likely to be interrelated, understanding the drivers of the labor share might contribute significantly to the Japanese economic and policy debate. Surprisingly, the existing literature on the labor share in Japan is rather limited and confined to country or industry studies. We first attempt to analyze the drivers of the labor share in Japan at the firm level. To this aim, we employ a panel of manufacturing firms from the Basic Survey of Japanese Business Structure and Activities, spanning from 2001 to 2012. By means of panel data estimators, we show how, besides technological variables, firms’ labor share depends significantly on the share of regular workers, on the importance of firms’ international engagement, and on various institutional settings of the product and labor markets.
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Notes
- 1.
Due to collinearity issues, the two-step GMM model does not include prefecture dummies.
- 2.
We estimate the total factor productivity following the method that Olley and Pakes (1996) proposed and normalize it by subtracting the sector average of TFP in 2000. We also estimate the model using the non-normalized TFP and the normalized TFP based on the sector average of the TFP in 1995. The results are consistent with those presented in Table 2 and are available on request.
- 3.
In the data that we use, the average capital–labor ratio gradually increased in the late 1990s and reached its peak in 2002. After some years of relative stability, it declined steadily after 2008.
- 4.
According to the information that the Ministry of Health, Labour and Wealth (December 2017) provided, the estimated trade union organization rate amounted to 17.1% in 2017.
- 5.
We also estimate the model with a different age threshold (40-year-olds and 45-year-olds). The results are very similar to the ones that we present in Table 4 and are available on request.
- 6.
According to the “Labour Force Survey” that the Ministry of Internal Affairs and Telecommunication implemented, the number of female workers in the manufacturing industry was 4.33 million in 2002, following the application of the new industrial classification, but decreased to 3.17 million in 2012. During this period, except for 2006, it consistently decreased. During the same period, the proportion of women in manufacturing workers also declined from 33.5% to 29.5%.
- 7.
According to our data, the correlation coefficient between the sector-level labor share and the female employment share amounted, for the whole period, to 0.0877. On a year-by-year basis, it increased steadily over time.
- 8.
We also run estimates using an alternative definition of import impacts (import/output), and these largely confirm the results. Furthermore, dropping the firm-level dummy variable for imports does not make any significance difference to the outcomes that we present in Table 4.
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Fukao, K., Ito, K., Perugini, C. (2019). A Microeconomic Analysis of the Declining Labor Share in Japan. In: Fields, G., Paul, S. (eds) Labor Income Share in Asia. ADB Institute Series on Development Economics. Springer, Singapore. https://doi.org/10.1007/978-981-13-7803-4_10
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