Effects of Economic Crises on Employment and Productivity Dynamics in Japan

Author Name IKEUCHI Kenta (Fellow, RIETI) / YoungGak KIM (Senshu University) / Hyeog Ug KWON (Faculty Fellow) / FUKAO Kyoji (Faculty Fellow, RIETI)
Creation Date/NO. March 2017 17-J-017
Research Project East Asian Industrial Productivity
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Japan experienced multiple recessions during the "Two Lost Decades." According to previous studies, economic crises may affect the metabolic function of the economy (e.g., Caballero and Hammor 1994). However, there are limited empirical studies on the effect of economic crises on the metabolic function of the economy in Japan. Therefore, in this paper, using microdata of the manufacturing industry, we analyze the relationship between productivity and employment during periods of crises in the Japanese economy, using industrial level and micro level data. The results indicate that the economic crises experienced by Japan during the "Two Lost Decades" reinforced the efficient allocation of resources within industries through the expansion of a relative share of highly productive establishments.