International Comparisons of Labor Productivity: Level and dynamics

Author Name MIYAKAWA Daisuke (Hitotsubashi University) / TAKIZAWA Miho (Toyo University)
Creation Date/NO. April 2018 18-P-007
Research Project Microeconometric Analysis of Firm and Industry Growth
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One of the most important policy and practical mandates is to improve productivity. Given various constraints found in the supply side (e.g., labor supply) in Japan, the present paper documents the current status of Japanese industry-level labor productivity and its dynamics. Toward this end, using the data up to 2015, we measure the level of labor productivity, compare it with that in other developed countries (i.e., United States, Germany, United Kingdom, and France), decompose the change in it to the dynamics in the value added (i.e., numerator) and the labor input (i.e., denominator), and study its implication. We find, first, that the observed low level of labor productivity in the Japanese non-manufacturing industry follows the large drop in added value, which is not offset by the reduction in labor input over the last decades. Contrary to this feature, second, selected manufacturing industries have been experiencing improvement in the labor productivity through various dynamics associated with value added and labor input. Third, except for a limited number of industries such as business services, these results are robust against the benchmarking based on the productivity level of other developed countries. Fourth, we also find substantial heterogeneity associated with the dynamics of value added and labor input over each industry and year, which implies that the observed long-term change in the industry-level labor productivity crucially reflects the various industry-level dynamics in the short term.