The Role of Public Employment Services in a Developing Country: The Case of Japan in the Twentieth Century

Ryo Kambayashi ()

No 40, PRIMCED Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: Like all developed and developing economies, Japan struggled with labor market issues in the process of industrialization. The Public Employment Service (PES) was probably the only countermeasure of the Japanese government before 1938, since other labor market policies such as minimum labor standard, unemployment insurance, and unionization were highly restricted by the political climate. In this article, we discuss the importance of the institutional arrangements of the PES by examining the developing stage of the Japanese labor market. In Japan, the PES was first institutionalized officially by the Employment Exchange Act in 1921. In the wake of the Kanto earthquake disaster in 1923, the PES played a substantial role in the recovery process, which implies the capacity of the PES to reduce unemployment even in a developing economy. However, under normal economic circumstances during the 1910s and 1920s, the institutional arrangement of the PES?namely, the financial backbone of the government and the nationwide network?was not effective as shown by anecdotes and ad hoc surveys. The statistical analysis of the matching function clearly shows that the PES, at least during the 1920s, had a fundamental problem?lacking long-term relations with other economic agents. Finally, improvements were made in the PES during the 1930s to cope with the economic crisis from the Great Depression. Such improvements were realized by incorporating already-existing networks of organizations that spontaneously emerged at the grassroots level. By 1938, when the Employment Exchange Act was revised to abolish private agencies, some PES centers had already absorbed nearby private networks and the matching technique of the PES was almost the same as that of private agencies. An ad hoc physical and financial investment by the government may not lead to the provision of efficient public services, and it is important to recognize that labor market policies are based on a long-term relationship among the PES, job seekers, and employers.

Keywords: public employment agency; private employment agencies; labor market intermediaries; matching function; Kanto earthquake (search for similar items in EconPapers)
JEL-codes: J68 N35 O15 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2013-03
New Economics Papers: this item is included in nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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