Labor Force Participation Rate in Japan

Hiroshi Kawata and Saori Naganuma
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Hiroshi Kawata: Bank of Japan
Saori Naganuma: Bank of Japan

No 10-E-7, Bank of Japan Review Series from Bank of Japan

Abstract: Although Japan's labor force participation rate has declined in recent years, the rates of participation among different age and gender groups show various patterns. We overview some of those developments and examine the determinant factors of labor supply from cyclical as well as structural perspectives. From the cyclical perspective, we find that younger and elderly males gave up looking for work due to the recession after the collapse of Lehman Brothers (a phenomenon known as the"discouraged worker effect") and therefore the labor force participation rates of those categories declined. On the contrary, the labor force participation rate of females around 30 years old was firm, since spouses entered job markets to support households' income following the decline in the husbands' income (known as the"household assistance effect"). From the structural perspective, our empirical analysis suggests that population aging puts downward pressure on the aggregate labor force participation rate in the long run. Female labor force participation rates, however, were relatively stable, since carrier opportunities for females have expanded and because more females have wanted to work.

Date: 2010-12
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