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Changes in Japan’s labor market during the Lost Decade and the role of demographics

Julen Esteban-Pretel, Ryuichi Tanaka and Xiangcai Meng

Journal of the Japanese and International Economies, 2017, vol. 43, issue C, 19-37

Abstract: We study the changes that took place in the Japanese labor market due to the decade-long stagnation of the 1990s. Using the Labor Force Survey micro-data from 1983 to 2008 we construct worker flows and study the effects of the so-called Lost Decade on unemployment, employment and participation. We perform the analysis both at the aggregate level and disaggregated by age and gender to understand the type of worker that was most affected by the long recession. We also perform counterfactual experiments to study the importance of demographic factors in such changes. We find that the decade-long recession significantly altered the state of the labor market, although not all workers were affected equally. We find that while almost all changes observed in the unemployment rate can be attributed to the recession, part of the evolution of the employment to population ratio and a large extent of the decline in the participation rate can be accounted for by the aging of the population. We also find that the aging effects are stronger for female workers than for their male counterparts.

Keywords: Labor market flows; Japan’s lost decade; Unemployment; Labor force participation; Population aging (search for similar items in EconPapers)
JEL-codes: E24 J60 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1016/j.jjie.2016.11.002

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