Labor Productivity in the Japan's Home Help Industry: Evidence from Establishment-Level Data

This study aims to empirically investigate the determinants of labor productivity (LP) of Japan's home help industry, such as economies of scale and economies of scope. By using establishment-level data constructed through the Care Service Information Disclosure System (CSIDS), the study estimates a simple LP function. Major results of this study are as follows. First, LP varies notably across establishments in Japan's home help industry. Second, Economies of scope, competition conditions, years of business activity, type of ownership, quality of service and demand factors have significant impact on the LP of establishments. Economies of scale may also have a positive impact on LP because we find that joint-run establishments outperform single establishments. Third, although the exiting and new entrant establishments both have much lower LP than the existing establishments, LP of second year establishments is higher than LP for existing ones. This result suggests that entry and exit play an important role in the reallocation process in the home help industry. Finally, variance decomposition of the logarithm of establishment-level LP shows that the component within municipalities is much larger than the component between municipalities. There is a β-convergence in establishment-level LP. Convergence of LP between municipalities seems to be faster than within municipalities.