female labor force participation in japan: an aggregate model

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Female Labor Force Participation in Japan: An Aggregate ModelAuthor(s): M. Anne HillSource: The Journal of Human Resources, Vol. 19, No. 2 (Spring, 1984), pp. 280-287Published by: University of Wisconsin PressStable URL: http://www.jstor.org/stable/145569 .

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FEMALE LABOR FORCE PARTICIPATION IN JAPAN: AN AGGREGATE MODEL*

The steady increase in the labor force participation of married women in the U.S. during the post-World War II period has stimulated consid- erable interest in and research on the economic determinants of a woman's decision to work. Pioneering work by Mincer [11] has served as a theoretical and empirical foundation for numerous studies of female labor force participation. This research typically treats a woman's current labor force status (measured for the individual as a dummy variable equal to one, and for the population as the fraction working) as a measure of labor supply that depends upon economic and demographic characteristics such as female earnings, male earnings, nonearned income, schooling, number of children, and so on. While more recent theoretical models and statistical techniques have been refined considerably, the models estimated with U.S. data have, in general, provided empirical support for the un- derlying theoretical predictions and reasonable agreement among the household level and the aggregate level results for women. In particular, for white married women in the U.S., there appears to be a strong positive relationship between the probability of entering the labor force and a woman's wage (and usually her level of schooling) and a negative relationship between other family income and a woman's propensity to work. (See Heckman et al. [6] for a thorough discussion of recent theoretical work and empirical results.)

In contrast, the straightforward application of a standard dichotomous labor force participation decision model to aggregate Japanese data has produced somewhat anomalous results. Umetani [16] and Hamilton [3] relate the overall female labor force participation rate (the fraction of

* I would like to thank Robert Evans, Robert Moffitt, Yoko Sano, T. Paul Schultz, Wim de Vijverberg, and three anonymous referees for their comments. Remaining errors are my own. This research was supported in part by funds from the Japan Foundation, the William and Flora Hewlett Foundation, and NIH Training Grant No. 5-T32 HD07146- 03. An earlier version of some parts of this paper was published in Nihon Rodo KyOkai Zasshi, January 1982 (in Japanese). [Manuscript submitted August 1982; accepted No- vember 1983.]

The Journal of Human Resources * XIX * 2 0022-166X/84/0002-0280 $01.50/0 o 1984 by the Regents of the University of Wisconsin System



Communications 1 281

women working in any employment status) to socioeconomic variables, including male earnings, female earnings, number of children, and a measure of the regional predominance of agriculture. While most of the coefficients have the expected sign, the estimated own-wage effect is negative. In other studies, Nagano [12], Ohbuchi [14], and Nishikawa and Higuchi [13] omit female wages from their estimations.

One potential reason for this estimated negative own-wage effect is that in Japan a surprisingly large fraction of the employed labor force (23.5 percent of working men and 38.0 percent of working women) are self-employed and family workers (Japan Statistical Yearbook [9]).1 In the U.S. only 11 percent of all working men and 6.6 percent of all working women were self-employed or family workers in 1978 (Bureau of the Census [17]). In the U.S. and countries with a similar distribution of the labor force by employment status, the labor force participation decision may be treated as a dichotomous choice-to work or not to work. How- ever, if individuals in Japan regard the decision to enter the labor force as an "employee" as distinct from the decision to enter the labor force as a "family worker" or as "self-employed," then their responses to socioeconomic variables, especially the prevailing wage, may differ signif- icantly.

There are several reasons why the dichotomous model may not apply without modifications in countries which, like Japan, are characterized by large segments of the labor force engaged in agriculture or in small family-run businesses. First, working in a family enterprise may allow comparatively costless substitution between time at home and time at work. For example, mothers may be able simultaneously to care for their children and to work in a small family business or on a farm, allowing joint production of "home goods" and "market goods." Second, self- employed and family workers may receive payments-in-kind instead of or in addition to actual wages. Also, while employees may face a wage rate that is independent of their hours of work, self-employed and family workers may be assumed to receive the value of their marginal product.2 Third, the wife's time in a family enterprise may be complementary with the husband's time. This complementarity, combined with potential dis- crimination encountered by married women in the Japanese labor force,

1 In Japan the "labor force" includes anyone who worked more than one hour per week for pay or profit during the week prior to the survey period. This definition includes

self-employed workers and workers in a family business. In the U.S. the labor force includes those workers in a family business who worked more than 15 hours. Family workers in Japan are persons who work in an unincorporated enterprise operated by a

family member (see [18] for details). 2 In Japan, however, as in other countries, it is common to observe a positive relation

between the hourly wage and full-time employee status relative to part-time employee status.



282 | THE JOURNAL OF HUMAN RESOURCES

may result in higher family income than if husband and wife worked apart.

In an earlier study [8], I developed a model for use with microdata to incorporate these considerations. That model treated two employment status choices-to engage in family work or to work as an employee-as distinct. (For estimation, the sample excluded a small number of self- employed women.) The dependent variable was then trichotomous: working as an employee, working as a family worker, and not working. The empirical analysis used 1975 household level data for married women in the Tokyo Metropolitan Area. Based on the subsamples of employees and family workers reporting wages, a potential wage for each woman for each employment status was estimated, correcting for potential sample selection bias. A multinomial logit technique was used to estimate the parameters of the model. The empirical results showed a statistically significant positive own-wage effect for the decision to work as an employee and a statistically significant negative own-wage effect for the decision to work as a family worker. The husband's income had the expected negative effect on participation as an employee, but had a positive effect on the decision to engage in family work. The empirical results generally indicated that the responses of "employees" appear to be reasonably similar to the responses of all workers in the U.S., while the responses of family workers differ substantially. For the study reported in this paper, this model was modified for estimation with aggregate cross-section data and the empirical analysis was extended to data for All Japan.

I. AN AGGREGATE MODEL OF LABOR FORCE PARTICIPATION

The model developed here differs from previous aggregate models estimated for Japan by defining the dependent variable as the participation rate for "employees." That is, the decision to work is treated as the decision to participate in the labor force as an employee; family workers and the self-employed are grouped together with nonworkers.3

As the dependent variable is limited between 0 and 1, it is trans- formed using the cumulative logistic distribution. Previous models estimated for Japan have used, as a dependent variable, the participation rate in either an arithmetic or logarithmic form.

A nonstochastic theoretical model may be specified as:

(1) ln(P/(l - P)) = B'X

using 46 prefectures (excluding Okinawa) as observations. (A subscript

3 For a discussion of various problems when using aggregate data to estimate a model that is specified for individual decisions, see McFadden and Reid [10] and Hartman [4],




for each prefecture is omitted for brevity.) P is the probability of working as an employee, and X is a vector of independent variables. Since we do not observe P, the observed relative frequency, F, is used, defined for each prefecture as:

(2) F= E/TP

where E is the number of female employees and TP is the total number of females over age 15. The econometric model is:

(3) ln(F/(l - F)) = B'X + e

where e is asymptotically distributed with mean 0 and variance 1/(TP X P X (1 - P). Equation (3) is estimated using generalized least squares (GLS) as e is heteroskedastic, with the appropriate weight for the prefecture being:

(4) w = (TP X F-X (1 - F))1/2

(See Theil [15, pp. 632-36] for econometric details.) Table 1 displays the definitions, means, and data sources. The data

are drawn primarily from the 1970 Population Census of Japan. In 1970, the overall female labor force participation rate in Japan was 49.9 as compared with 43.4 in the U.S. The participation rate as employees in Japan was 27.5. The explanatory variables include a constructed hourly wage for males and females, monthly nonwage income, the average number of children under age 5 per married woman, and a measure of the local predominance of agriculture. Educational attainment for men and women and the average age in the prefectures are also included as proxies for potential wage rates.

Table 2 presents the estimates for four specifications of the aggregate participation model. The first specification includes female and male hourly wage rates along with nonwage income, children under age 5, and the agriculture variable. In this case, the female wage rate has the expected positive sign, the male wage effect is negative, and nonwage income has the expected negative effect. The second specification includes male and female education and age as proxies for the potential wage. The third specification includes only male and female education as wage proxies. In both specifications, the proxies for the wage rates have opposite than the expected effects; female education and age reduce the likelihood of working, while male education and age increase the likelihood of working.

In each of the three specifications, children under age 5 and the predominance of agriculture have the expected strong negative effects. However, these variables may themselves be subject to economic choice and their inclusion may lead to simultaneous equations bias. For comparison, the fourth specification does not include these variables. Al-




TABLE 1 VARIABLE DEFINITIONS, MEAN VALUES, AND SOURCES

Variable Mean Source

Participation rate-fraction of all females over age 15 whose employment status is "employee"

Female hourly wage rate, yen per hour- total earnings per month/total hours worked per month

Male hourly wage rate, yen per hour- total earnings per month/total hours worked per month

Female education-fraction of females not attending school who have attained at least middle school, senior high school, or old youth training school

Male education-fraction of males not attending school who have attained at least middle school, senior high school, or old youth training school

Female age-average age of women over 15

Male age-average age of men over 15

Nonwage income-yen per month, excluding social security payments and income-in-kind

Children under age 5-number of children 0 to 4 years old per married woman

Agriculture-fraction of the total labor force employed in agriculture

0.27

221.52

413.14

0.44

0.48

35.7

34.9

2394.7

0.36

0.18

1970 Census

1970 data from the Yearbook of the Monthly Labor Survey, 1976 1970 data from the Yearbook of the Monthly Labor Survey, 1976 1970 Census

1970 Census

Calculated from 1970 Census Calculated from 1970 Census 1969 Survey of Family Income and Expenditures 1970 Census

1970 Census

though the overall explanatory power of the equations is much lower, the female wage rate and nonwage income still have the expected effects,



Communications 285

TABLE 2 EMPIRICAL RESULTS FOR FEMALE LABOR FORCE PARTICIPATION

(EMPLOYEES ONLY) PREFECTURAL DATA, 1970

Independent Specification Variable (1) (2) (3) (4)

Intercept 1.30 1.84 0.85 -7.24 (0.76), (1.30) (0.34) (-6.30)

Ln female wage rate 0.60** - - 0.42 (1.98) (1.11)

Ln male wage rate -0.71* - - 0.63 (-1.75) (1.46)

Female education -- 1.68** -1.59** -

(-2.04) (-2.04) Female age - --0.11* - -

(-1.74) Male education - 2.17** 1.81** -

(2.18) (2.04) Male age - 0.06 - -

(1.10) Nonwage income -0.69* -0.54 -0.49 -0.69

(X 10-4) (-2.00) (-1.39) (-1.26) (-1.48) Children under 5 -2.06*** -2.88*** -2.25*** -

(-4.39) (-4.34) (-4.41) Agriculture -1.89*** - 1.52*** - 1.77** -

(-6.11) (-4.86) (-6.61) F-statistic 28.51 21.67 28.75 18.45

Note: Logit coefficients reported. As dP/dX = P(1 - P) X {[dln(P/(l-P)]/dX}, to recover partial derivatives at the sample mean one may multiply by .1992. t-statistics are in parentheses. *** 1 percent level of significance. ** 5 percent level of significance. * 10 percent level of significance.

but the sign of the male wage rate becomes positive. If the male wage effect is viewed as a substitution rather than as an income effect, there is no a priori expectation for the sign of this effect. A positive sign indicates that male and female time spent in activities other than working as an employee may be complements.

The estimated positive own-wage elasticities from specifications (1) and (4) are 0.44 and 0.30, respectively. These elasticities compare roughly with the U.S. cross-section results from Fields [2] and from Dooley [1] for 1970. When the number of young children and a measure of the predominance of agriculture are held constant, the male wage effect is




negative, with an elasticity of -0.52 lying between the Bowen and Fi- negan results for 1950 and 1960, reported by Fields, and between Dooley's estimates of -0.49 for 1970 and -0.58 for 1950.

II. SUMMARY AND CONCLUSIONS

In this paper I have extended my previous work on female labor force participation in Japan for use with aggregate cross-sectional data. The empirical results reinforce the previously observed similarities between the behavioral responses of women in the U.S. regarding the decision to enter the labor force and those of Japanese women regarding the decision to enter the labor force as an employee. However, there are several short- comings in this analysis. As Dooley [1] clearly illustrates, estimates using published area averages may differ dramatically from those found when area averages calculated from individual data are used. In addition, as we have learned from previous studies using microlevel data, especially those by Heckman [5], the wage rate reported by those women who are working may not appropriately measure the wage that a woman out of the labor force would receive if working. Finally, the dependent variable groups together self-employed and family workers with nonworkers.

In the U.S., "labor force participation" usually implies that a woman leaves home to work for someone else. In Japan and in other developed and developing countries characterized by labor markets with large informal and/or agricultural sectors, this may not be the case. The differences in these economic opportunities should lead future researchers to consider carefully the appropriate methods of modeling and analyzing these distinct labor force participation decisions.

M. ANNE HILL Rutgers University

REFERENCES

1. Martin D. Dooley. "Labor Supply and Fertility of Married Women: An Analysis with Grouped and Individual Data from the 1970 U.S. Census." Journal of Human Resources 17 (Fall 1982): 499-532.

2. Judith M. Fields. "A Comparison of Intercity Differences in the Labor Force Participation Rates of Married Women in 1970 with 1940, 1950, and 1960." Journal of Human Resources 11 (Fall 1976): 568-77.

3. Jonathan Hamilton. "Fertility and Female Labor Force Participation in Japan." Paper presented at the Japan Economic Seminar, 1979.

4. Raymond S. Hartman. "A Note on the Use of Aggregate Data in Individual Choice Models." Journal of Econometrics 18 (April 1982): 313-35.

5. James J. Heckman. "Sample Selection Bias as a Specification Error with Applications to the Estimation of Labor Supply Functions." In Female La-




bor Supply: Theory and Estimation, ed. James P. Smith. Princeton, N.J.: Princeton University Press, 1980.

6. James J. Heckman, Mark R. Killingsworth, and Thomas E. MaCurdy. "Em- pirical Evidence on Static Labour Supply Models: A Survey of Recent De- velopments." In The Economics of the Labour Market, eds. Zmira Horn- stein, Joseph Grice, and Alfred Webb. London: Her Majesty's Stationery Office, 1981.

7. M. Anne Hill. "A Comparison of Economic Models and Empirical Results for Female Labor Force Participation in Japan and the U.S." Nihon Rodo Kyokai Zasshi (January 1982) (in Japanese).

8. . "Female Labor Force Participation in Developing and Developed Countries: Consideration of the Informal Sector." Review of Economics and Statistics 65 (August 1983): 459-68.

9. Japan, Office of the Prime Minister, Bureau of Statistics. Japan Statistical Yearbook, various issues.

10. Daniel McFadden and Fred Reid. "Aggregate Travel Demand Forecasting from Disaggregated Behavioral Models." Transportation Research Record No. 534 (1976): 24-37.

11. Jacob Mincer. "Labor Force Participation of Married Women." In Aspects of Labor Economics, ed. H. Gregg Lewis. Princeton, N.J.: Princeton Uni- versity Press, 1962.

12. Hitoshi Nagano. "Major Influences on Changing Female Labor Supply." M.A. thesis, Aoyama University, Japan, 1980 (in Japanese).

13. Shunsaku Nishikawa and Yoshio Higuchi. "Determinants of Female Labor Force Participation." Nihon Rodo Kyokai Zasshi (September 1979), re- printed in Japanese Economic Studies (Winter 1980-1981).

14. Hiroshi Ohbuchi. "Major Factors of Changes in the Labor Force Partici- pation Rate." In Rodoryoku-jinko no Keisai Bunseki (Economic Analysis of Labor Force Participation), ed. Ryozaburo Minami. Tokyo: Keiso Shobo, 1968 (in Japanese).

15. Henri Theil. Principles of Econometrics. New York: John Wiley & Sons, 1971.

16. Shunichiro Umetani. "An Analysis of the Participation Rates of Married Women." In The Economics ofFemaleLabor Supply, ed. Yoko Sano. Tokyo: Japan Institute of Labour, 1972.

17. U.S. Bureau of the Census. Statistical Abstract of the United States. Wash- ington: U.S. Government Printing Office, various years.

18. U.S. Department of Labor. The Role and Status of Women Workers in the United States and Japan. Washington: U.S. Government Printing Office, 1976.



female labor force participation in japan: an aggregate model

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