Is White-collor Productivity Low in Japan?: Evidence from the Electrical Machinery Industry

In recent searches for a scapegoat for Japan's long-term recession since 1992, white-collar sections of firms have been singled out. The basis of this discussion is an unproven proposition: productivity of a white-collar section is extremely low in Japan. This proposition has been reinforced by questionnaire surveys' results from firms and seemingly signficant correlations between macro statistics. In this paper, we try to estimate a white-collar section's Total Factor Productivity (TFP) by using a simple production model. Assuming that a firm's output is a combination of outputs from a production section and a non-production section, we can deduce a non-production section's TFP by subtracting a production section's contribution from the whole firm's TFP. The former can be captured from the data of The Census of Manufactures (CM) by MITI, and the latter from The Annual Security Reports (SR), by the Japanese commercial firms listed on the Stock Exchange.

The examined industry is the Japanese electrical machinery industry which, everyone believes, has been enjoying the highest productivity growth since Japan's rapid economic growth period. The observation period selected is from 1985 to 1993 because of the data availability. The empirical results are striking. During this period, including the time of the recession after the strong Yen period, the Bubble-Economy, and the recession after its collapse, a representative firm's TFP was declining by 0.70 percent. Out of this value, the contribution of a production section was - 1.85 percentage points, and that of a non-production section was 1.16 percentage points. The results show that placing blame on the white-collar section is not accurate for Japan's electrical machinery industry from 1985 to 1993 - actually, the white-collar section relieved the firm's TFP from declining.