Institutions, Deindustrialization, and Functional Income Distribution in Japan | Asian Development Bank

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Institutions, Deindustrialization, and Functional Income Distribution in Japan

Publication | November 2018
Institutions, Deindustrialization, and Functional Income Distribution in Japan

Since the 1970s, Japan has seen a decline in labor share in low-knowledge-intensity sectors.

We investigate the long-term drivers of the labor share in Japan using data from the Japanese Industrial Productivity database from 1970 to 2012. The descriptive and econometric results indicate that the decline in the labor share observed in Japan during the period of analysis was highly concentrated in the low-knowledge-intensity sectors, the employment share of which has increased remarkably. These sectors also experienced a strong increase in non-regular workers, who constitute a secondary segment of the labor market in Japan, characterized by low wages and very limited union coverage. The low level of protection of this group of workers and the increase in market power concentration have probably contributed to reducing the bargaining power of labor vis-à-vis employers and, consequently, the labor share.

WORKING PAPER NO: 895