Flexible labor, innovation regimes and the erosion of the Japanese model: Evidence from the Basic Survey on Wage Structure

Yuya Ikeda, Masatoshi Kato and Alfred Kleinknecht

Structural Change and Economic Dynamics, 2024, vol. 70, issue C, 333-339

Abstract: Due to labor market reforms around 2003–4, Japan has a growing group of ‘non-regular’ workers who are easy to fire, and have poor carrier perspectives. This marks a break with the traditional Japanese model of life-time employment that allowed for intensive in-company training and commitment of personnel. Drawing from a national wage structure survey, we find indications that employment of non-regular workers has a negative impact on productivity (proxied by wages), this negative impact being largest under innovation regimes that require a high cumulativeness of knowledge. Our findings are consistent with neo-Schumpeterian research in Europe which concluded that certain labor market rigidities, while being undesirable from a neoclassical perspective, can be useful to innovation. Our paper confirms the impression from earlier research that structural reforms of labor markets along supply-side lines are likely to be one of the reasons for a substantial decline of productivity growth in major OECD countries since about 2004/05.

Keywords: Cumulativeness of knowledge; Labor market flexibility; Wage penalties; Japan (search for similar items in EconPapers)
JEL-codes: J08 J31 J41 J53 M54 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:70:y:2024:i:c:p:333-339

DOI: 10.1016/j.strueco.2024.04.003

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