Revisiting Disability Employment and Firm Productivity in Japan

We use high-quality panel data that matched administrative data on the employment of persons with disabilities with financial information on Japanese firms to examine the causal effects of the employment of persons with disabilities on firms' financial indicators and productivity, that is, not only the average effect across firms, but also the heterogeneity across various firm types. First, in most cases, we find that the employment of persons with disabilities does not have a statistically significant effect on firm performance. This result is consistent with the manufacturing literature and we show that these trends also hold true for non-manufacturing firms. Second, we do not find an extensive or intensive margin of employment for persons with disabilities, as the increased employment of persons with disabilities has no impact on firm performance, regardless of whether a firm employed persons with disabilities at the beginning of the period of analysis. Third, we observe the benefit of employing persons with disabilities among medium-sized firms with subsidiaries that specialize in this type of employment. Specifically, sales, operating income, and net income per regular employee increase as the employment of persons with disabilities increases.