Was the Barrier to Labor Mobility an Important Factor for the Prewar Japanese Stagnation?

MPRA Paper from University Library of Munich, Germany

Abstract: Using a simple framework, I reexamine the Hayashi and Prescott hypothesis (2006) that a barrier to labor mobility that maintained high agricultural employment was a cause of the stagnation in the prewar Japanese economy. I find that the labor misallocation between the agricultural and non-agricultural sectors had larger negative effects on the prewar Japanese aggregate productivity than on the postwar aggregate productivity. However, this is not because the wage differential between the sectors was larger but because the agricultural nominal share was larger in prewar Japan. Finally, I show that a model that does not assume a barrier to labor mobility can explain the change in the prewar and postwar agricultural employment rate and nominal share. These results suggest that factors other than labor misallocation are responsible for the stagnation in the prewar Japanese economy.

Keywords: agriculture; barrier to labor mobility; prewar Japan; resource misallocation; two-sector model (search for similar items in EconPapers)
JEL-codes: E1 N3 N5 O1 O4 (search for similar items in EconPapers)
Date: 2008-04-09
New Economics Papers: this item is included in nep-lab and nep-mac
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Citations: View citations in EconPapers (2)

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