TFP growth slowdown and the Japanese labor market in the 1990s

Julen Esteban-Pretel, Ryo Nakajima, Ryuichi Tanaka

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

Unemployment in Japan nearly tripled during the 1990s. Underlying this upsurge lie an increase in the probability of workers to lose their jobs and a decrease in the probability that the unemployed find jobs. This paper analyzes the sources responsible for these labor market changes in Japan in the decade of the 1990s. We build, calibrate, and simulate a neo-classical growth model with search frictions in the labor market. Using actual TFP data, the model is able to reproduce the path of unemployment and the job flows, as well as that of output. We find it to be the decrease in productivity, coupled with the reduction in hours worked, which curtails the profits of firms, inducing a drop in employment and an increase in unemployment.

Original languageEnglish
Pages (from-to)50-68
Number of pages19
JournalJournal of The Japanese and International Economies
Volume24
Issue number1
DOIs
Publication statusPublished - 2010 Mar 1

Keywords

  • Growth model
  • Japan
  • Lost Decade
  • Search and matching
  • TFP
  • Unemployment

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

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