Effect of Work–Life Balance Practices on Firm Productivity: Evidence from Japanese Firm-Level Panel Data

Isamu Yamamoto 1  and Toshiyuki Matsuura 2
  • 1 Faculty of Business and Commerce, Keio University, 2-15-45, Mita, Minato-ku, Tokyo 108-8345, Japan
  • 2 Keio Economic Observatory, Keio University, 2-15-45, Mita, Minato-ku, Tokyo 108-8345, Japan
Isamu Yamamoto and Toshiyuki Matsuura

Abstract

This article examines how firm practices that could contribute to worker attainment of worklife 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.

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The B.E. Journal of Economic Analysis & Policy (BEJEAP) is an international forum for scholarship that employs microeconomics to analyze issues in business, consumer behavior and public policy. Topics include the interaction of firms, the functioning of markets, the effects of domestic and international policy and the design of organizations and institutions.

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