Job creation and destruction in Japan: Evidence from division-level employment data

Abstract

This study employs division-level data for Japanese firms to measure the simultaneous processes of job creation and destruction that take place within a firm. This provides a more nuanced picture of employment dynamics than the standard approach which rests on a single measure of net job creation at firm level. Data cover the period 1995–2014 at annual frequency for about 30,000 firms each year. Empirical results indicate that wages and job productivity significantly affect job creation and destruction. Specifically, higher wages decrease job creation and increase job destruction, whereas higher productivity increases job creation and reduces job destruction. Moreover, although employment under Japan’s lifetime employment system (seishain workers) helps to mitigate job destruction, it also hinders job creation, with the latter effect dominating to diminish employment growth overall.