Center for Economic Research, Department of Economics, University of Minnesota
It is well known that the unemployment rate in Japan has been the lowest
among the DECD countries. Although the U.S. and Japan differ in their
statistical definitions of unemployment, this has only a minor effect on the
unemployment rates. The purpose of this paper is to measure contributions of
economic and sociological factors specific to the Japanese economy as opposed
to the U.S. economy.
It will be shown that at least half of the U.S.-Japan difference in
unemployment rates is accounted for by the differences in layoff practices,
youth unemployment, and the relative shares of the agricultural sectors in the
economies. One interesting finding which has not been pointed out before is
the relatively large contribution of the difference in teenage participation
and teenage unemployment between the two countries. About 20 to 25% of the
total difference in unemployment rates is due to differences in the behavior
of teenagers in the two countries. Fewer and fewer Japanese teenagers are
participating in the labor market, due to strict schooling requirements, and
lower minimum wages. The unemployment rate of Japanese teenagers is also much
lower than that of their American counterparts.
A hypothetical U.S. unemployment rate is constructed to adjust for the
differences between the U.S. and Japan in the size of the agricultural sector,
layoff practices, and teenage participation and unemployment. The
hypothetical rate partially explains the differences in Okun's coefficients
and the elasticity of employment with respect to GNP between the two
Ito, T., (1984), "Why is the Unemployment Rate so Much Lower in Japan than in the U.S.?", Discussion Paper No. 198, Center for Economic Research, Department of Economics, University of Minnesota.
Why is the Unemployment Rate so Much Lower in Japan than in the U.S.?.
Center for Economic Research, Department of Economics, University of Minnesota.
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