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

Author/Editor:

Chad Steinberg ; Masato Nakane

Publication Date:

January 1, 2011

Electronic Access:

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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:

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. 2011/015

Subject:

Employment Labor Labor markets Unemployment Wages

English

Publication Date:

January 1, 2011

ISBN/ISSN:

9781455212514/1018-5941

Stock No:

WPIEA2011015

Pages:

30

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