Do Work-Life Balance Policies Increase a Firm's Total Factor Productivity?: Evidence from panel data of Japanese firms

This paper examines how firms' policies for workers' work-life balance (WLB) affect total factor productivity (TFP) in the long run, by using panel data of Japanese firms from the 1990s. Although we observed a positive correlation between firms' WLB policies and their TFP, once controlling for unobserved firm heterogeneity, we found no causal relationship where WLB policies increase a firm's TFP in the long run. Under the following conditions, however, WLB policies would likely improve a firm's long-run TFP: (1) firms with more than 300 workers, (2) manufacturing firms, (3) firms incurring large fixed costs of labor, or (4) firms practicing an equal employment policy for both men and women. We also found that the following WLB policies tend to increase a firm's TFP: (1) establishing a particular department that promotes an WLB policy, (2) making systematic efforts to reduce long work hours, or (3) introducing a system to promote temporary workers to permanent workers. Furthermore, focusing on small and medium firms with 100-300 workers, we found mixed effects in terms of how WLB policies affect a firm's TFP, which indicates that careful considerations are important when promoting WLB policies at such firms. These results tell us that WLB policies would not unconditionally increase a firm's TFP, but it is likely that certain firms that satisfy several conditions would likely benefit as shown in an increase in their TFP following the introduction of proper WLB policies. Considering the fact that the adoption rates of WLB policies for those firms satisfying the conditions are more or less the same as the rates for those that do not, we believe that the more such firms understood what effect WLB policies could have on their TFP, the more these firms are likely to introduce WLB policies autonomously.

English version of this paper is 12-E-079.