Innovation and Employment Growth in Japan: An empirical analysis based on micro data of the Basic Survey of Business Structure and Activity

Author Name YoungGak KIM (Senshu University) / IKEUCHI Kenta (NISTEP) / KWON Hyeog Ug (Faculty Fellow, RIETI) / FUKAO Kyoji (Faculty Fellow, RIETI)
Creation Date/NO. January 2016 16-J-002
Research Project East Asian Industrial Productivity
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Using firm level panel data taken from the Basic Survey of Japanese Business Structure and Activities between 1991 and 2010, we examine the relationship between innovation, excessive labor, and employment growth in Japan. The main results of this paper are as follows: (1) There are relatively many firms holding excessive labor. (2) The degree of the excessive labor is serious for large firms. (3) Firms do not adjust employment instantly. If excessive labor for the current term exists, firms gradually reduce employment. This result is consistent with theoretical model considering adjustment cost. (4) Other things being equal, as firms invest aggressively in research and development (R&D), they increase employment. (5) The negative correlation between total factor productivity (TFP) growth and employment growth is observed, whereas TFP growth by R&D has a positive impact on employment. (6) The product innovation that is proxied by R&D positively affects employment in the manufacturing sector. On the other, in the non-manufacturing sector, the process innovation that is proxied by capital formation increases employment.

Published: Fukao, Kyoji, Kenta Ikeuchi, Young G. Kim, and Hyeog U. Kwon, 2017. "Innovation and employment growth in Japan: Analysis based on microdata from the basic survey of Japanese business structure and activities," The Japanese Economic Review, Vol. 68(2), pp. 200-216