On Human Resource Development and Productivity Growth in Japan: A survey of theory, measurement and empirical studies on human resources

Author Name MIYAGAWA Tsutomu (Faculty Fellow, RIETI) / TAKIZAWA Miho (Gakushuin University)
Creation Date/NO. May 2022 22-P-010
Research Project Capital Accumulation and Productivity Growth after the COVID-19 Crisis
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Human resource development is one of the key factors in improving productivity. It is important to understand the effects of human resource development on productivity improvement in a Japanese context, because most large Japanese firms have unique training systems based on the Japanese employment system. Our survey covers the theoretical background of human resource development, the measurement in human capital, and empirical studies on the effects of human resource development on productivity in Japan under the unique Japanese employment system.

Starting from the human capital theory by Becker (1964), we show how Becker’s model is revised when we consider an incomplete labor market. Regarding the measurement of human capital, we begin to examine how to measure human capital in the framework of National Accounts. In the satellite account in Canada, we found that the share of investment in human capital was 17.8% of GDP in 2010. The JIP and EUKLEMS databases focus on the training costs of firms, and we find that training costs in Japan in the late 2010s amounted to 1.6 trillion JPY and only a 0.3% share of GDP - which is less than in other advanced countries.

Empirical studies that use firm-level data about the effects of human resource development on productivity improvement in Japan show that off-the-job training contributes to productivity improvement, while the effects of on-the-job training on productivity improvement are inconclusive. Our recent survey on work styles under the COVID-19 pandemic show a decrease in training.

Based on our survey results, we propose two policies to improve productivity through human resource development. The first is to create a satellite account for human capital. Visualizing human capital in the accounting system will encourage increased government support for human resource development by firms. The second is to support physical capital investment. The increase in physical capital investment with new technology improves the skills of employees through on-the-job training—the main training system used in Japanese firms.