The Path to Higher Growth: Does Revamping Japan’s Dual Labor Market Matter?

 
Author/Editor: Chie Aoyagi ; Giovanni Ganelli
 
Publication Date: October 01, 2013
 
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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: This paper argues that Japan’s excessive labor market duality can reduce Total Factor Productivity (TFP) due to a negative impact on non-regular workers’ effort and on firms’ incentives to train them. On the basis of cross-country empirical evidence, the paper proposes some reform options. In particular, our analysis suggests that reducing the difference in employment protection between regular and non-regular workers would substantially reduce labor market duality in Japan. One reform consistent with these findings is the introduction of a Single Open Ended Contract for all newly hired workers. This reform could be complemented by a shift towards a model that combines labor market flexibility and security (“flexicurity”) and by policies aimed at encouraging wage growth.
 
Series: Working Paper No. 13/202
Subject(s): Labor markets | Japan | Employment policy | Economic growth | Labor productivity | Labor market reforms

 
English
Publication Date: October 01, 2013
ISBN/ISSN: 9781484391303/2227-8885 Format: Paper
Stock No: WPIEA2013202 Pages: 26
Price:
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