International Comparison of Labor Productivity Distribution for Manufacturing and Non-Manufacturing Firms

TL;DR

This study compares labor productivity distributions between Japan and the US at the firm level, revealing power-law behaviors and sector-specific differences, especially highlighting the impact of small firms on Japan's non-manufacturing productivity.

Contribution

It provides a microscopic analysis of productivity distributions across countries and sectors, challenging prevailing macroeconomic views.

Findings

Power-law distribution observed in firm and sector productivity.

Japanese non-manufacturing low productivity linked to small firms.

Labor productivity varies significantly between countries and sectors.

Abstract

Labor productivity was studied at the microscopic level in terms of distributions based on individual firm financial data from Japan and the US. A power-law distribution in terms of firms and sector productivity was found in both countries' data. The labor productivities were not equal for nation and sectors, in contrast to the prevailing view in the field of economics. It was found that the low productivity of the Japanese non-manufacturing sector reported in macro-economic studies was due to the low productivity of small firms.