This article examines how firm practices that could contribute to worker attainment of work–life balance (WLB) affect the total factor productivity (TFP) of a firm, by using panel data of Japanese firms from the 1990s. We observed a positive correlation between the WLB practices and TFP among sampled firms. However that correlation vanished when we controlled for the unobserved firm heterogeneity, and we found no general causal relationship in which WLB practices increase firm TFP in the medium or long run. For firms with the following characteristics, however, we found positive and sizable effects: large firms, manufacturing firms, and firms that have exhibited labor hoarding during recessions. Since these firms are likely to incur large fixed employment costs, we infer that firms investing in firm-specific human skills or having large hiring/firing costs can benefit from WLB practices through a decrease in turnover or increase in recruiting effectiveness.
This study is based on microdata from the Basic Survey of Business Structure and Activities by the Ministry of Economy, Trade, and Industry, Japan, and an original survey co-sponsored by the Research Institute of Economy, Trade, and Industry (RIETI) and the Economic and Social Research Institute.
We are grateful to the institutes for their support. We thank Fumio Ohtake, Hank Farber, Lisa Kahn, Takao Kato, Sachiko Kuroda, Masako Kurosawa, Masaaki Mizuochi, Emiko Takeishi, Yukiko Yokoyama, as well as the member of the RIETI project and the participants of the 14th Labor Economics conference as well as Trans-Pacific Labor Seminar 2012, for their valuable comments. Because the data used in this study were obtained only by signing a confidentiality agreement, the authors are unable to release them. A data appendix with additional results, and copies of the computer programs used to generate the results presented in the paper, are available from the first author. This research is supported by the Japanese government’s Grants-in-Aid for Scientific Research [C] (Japan Society for the Promotion of Science; Research No. 23530289).
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Freeman and Shaw (2009) suggest that there is considerable heterogeneity or variation in business practices and performances across countries, firms, and establishments, as well as among workers within establishments.
In Japan, the government, together with employers and labor union circles, formulated a Charter for Work–Life Balance and an Action Policy for Promoting Work–Life Balance in 2007 to promote the concept of WLB among employers and employees.
For more details on the BSBA, see Morikawa (2010).
The WLB-JE was conducted by the Research Institute for Economy, Trade, and Industry (RIETI) of METI.
Descriptive statistics for the key variables as of 2007 are as follows (standard deviations are in parenthesis): The number of workers is 613 (1,967) for respondents and 616 (2,269) for non-respondents, the ratio of manufacturing firms is 0.56 (0.50) and 0.45 (0.50), the value added is 6,528 (31,078) and 5,672 (31,823), and the relative volatility of employment to output × 100 is 0.013 (0.024) and 0.016 (0.027).
The JIP Database is a semi-macro-level productivity database provided by the RIETI. It contains information on output, intermediate inputs, capital stock, and labor input for 108 industries for 1970 to 2008. For more details, see the RIETI website: http://www.rieti.go.jp/en/database/JIP2011/index.html
Because the adoption rates of WLB practices were generally very low in 1992, we used the data from 1998 in Figure 1.
In particular, the median of relative variance was 0.0048 for manufacturing firms with more than 300 workers and 0.0056 for other firms.
For details of TFP on WLP, see Petrin and Levinsohn (2013). We use the stata code provided by Amil Petrin’s website.
WLB practice 6 may include unobserved WLB practices or it could be a proxy of the actual adoption of the practice.
We confirmed that the balancing property was satisfied. In addition, we obtained similar results when we simply estimated equation  by ordinary least squares.
The year of the introduction of each WLB practice was surveyed only for the firms that had adopted the practice at the time of the survey. Thus, cases in which the practice was introduced but removed until the survey year were excluded.
Results similar to those in Table 2 are obtained when we focus on other firm characteristics such as firm size and industry.
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