The Determinants of Labor Share in Japan

The labor share of developed countries including Japan is declining. However, few studies have empirically analyzed the factors behind the decline in the labor share in consideration of the effects of globalization, the introduction of industrial robots, and denormalization of employment. It cannot be said that there is sufficient evidence for the policy recommendation aimed at raising the labor share. Therefore, this paper attempts to derive policy implications by conducting an empirical analysis of Japanese firms from 2006 to 2015. The main empirical analysis results are as follows. First, the introduction of industrial robots in recent years may have reduced the labor share. Second, the denormalization of employment is related to the decline in Japan's labor share. And finally, increasing globalization, such as exports, imports, offshoring, and competition with imported goods, has not had a clear impact on labor share. On the other hand, the degree of R&D concentration has the effect of increasing the labor share. The policy implications of these results are following. The promotion of R&D investment, the expansion of higher education to support new technology development and its use, the support for the re-education or retraining of workers, and the support for the transition to regular employment from non-regular employment are all required to raise the labor share.