To Fire or to Hoard? Explaining Japan’s Labor Market Response in the Great Recession

Author/Editor: Chad Steinberg ; Masato Nakane
Publication Date: January 01, 2011
Electronic Access: Free Full text (PDF file size is 1,146KB).
Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: The Great Recession pushed Japan’s unemployment rate to historic highs, but the increase has been small by international standards and small relative to the large output shock. This paper explores Japan’s cyclical labor market response to the global financial crisis. Our findings suggest that: (i) employment responsiveness has been historically low but rising over time with the increasing importance of the non-regular workforce; (ii) the labor market response was consistent with historical patterns once we control for the size of the output shock; and (iii) the comparatively lower employment response vis-à-vis other countries can in part be explained by the quick implementation of an employment subsidy program, a more flexible wage system, and a corporate governance structure that places workers rights above shareholders.
Series: Working Paper No. 11/15
Subject(s): Economic recession | Global Financial Crisis 2008-2009 | Labor markets | Manufacturing sector | Unemployment

Author's Keyword(s): Japan | Okun’s Law | Unemployment | Wages | Great Recession
Publication Date: January 01, 2011
ISBN/ISSN: 9781455212514/1018-5941 Format: Paper
Stock No: WPIEA2011015 Pages: 30
US$18.00 (Academic Rate:
US$18.00 )
Please address any questions about this title to