The Path to Higher Growth: Does Revamping Japan’s Dual Labor Market Matter?
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Summary:
This paper argues that Japan’s excessive labor market duality can reduce Total Factor Productivity (TFP) due to a negative impact on non-regular workers’ effort and on firms’ incentives to train them. On the basis of cross-country empirical evidence, the paper proposes some reform options. In particular, our analysis suggests that reducing the difference in employment protection between regular and non-regular workers would substantially reduce labor market duality in Japan. One reform consistent with these findings is the introduction of a Single Open Ended Contract for all newly hired workers. This reform could be complemented by a shift towards a model that combines labor market flexibility and security (“flexicurity”) and by policies aimed at encouraging wage growth.
Series:
Working Paper No. 2013/202
Subject:
English
Publication Date:
October 1, 2013
ISBN/ISSN:
9781484391303/1018-5941
Stock No:
WPIEA2013202
Pages:
26
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