Please see Research Statement for a summary of my research.

1. The Employment Systems in the U.S. and Japan, 1900-2000
In this project, I provide a comparative institutional analysis of the long-run evolution of labor markets and employment relations in the U.S. and Japan.

Implicit Contracts, the Great Depression, and Institutional Change: A Comparative Analysis of U.S. and Japanese Employment Relations, 1920-1940. Journal of Economic History 63(3): 625-665, 2003. [Theoretical Appendix] [NBER Working Paper version]

In this paper, I employ a game-theoretic framework and a comparative analysis to study the impact of the Great Depression on private welfare capitalism, i.e., employers’ voluntary provisions of non-wage benefits, greater employment security, and employee representation to their workers. By characterizing private welfare capitalism as an implicit contract equilibrium in a repeated game, I document parallel institutional developments in the U.S. and Japan in the 1920s and the process of bifurcation thereafter. In the U.S., the breach of contract by major employers induced by the deep and prolonged depression led to the rise of explicit contracts, industrial unionism, and legal enforcement institutions. By contrast, the less severe depression in Japan allowed the maintenance of implicit contracts and company-wide unionism, which, in turn, led to the formation of complementary labor laws.

Did American Welfare Capitalists Breach their Implicit Contracts during the Great Depression? Preliminary Findings from Company-level Data. Industrial & Labor Relations Review 59(1): 55-86, 2005. [Theoretical Appendix] [NBER Working Paper version]

It has been claimed that American employers’ experiments in private welfare capitalism collapsed during the Great Depression and were subsequently replaced by the welfare state and industrial unionism. Recent studies, however, reveal considerable differences in experience across firms. In this paper, I model private welfare capitalism as a set of personnel practices that constituted an implicit contract equilibrium and test the implications of implicit contract theory using data from 14 leading manufacturing firms. Consistent with theoretical predictions, I find that the breach of implicit contracts was positively correlated with the severity of the depression’s impact experienced by firms and negatively correlated with the effectiveness of what I call “internal enforcement mechanisms” instituted by firms. Moreover, greater breaches of implicit contracts are associated with greater employee support for industrial unions and more explicit employment contracts concluded under the New Deal. Finally, I offer a comparative case study of two companies (GM and GE) to document internal dynamics that highlights the importance of internal enforcement mechanisms, lending further support to implicit contract theory.

The Evolution of Employment Systems in the U.S. and Japan, 1900-1960: A Comparative Historical and Institutional Analysis (Dissertation Summary). Journal of Economic History 60: 515-519, 2000. [Awarded the 1999 Gerschenkron Prize for the best dissertation in non-U.S. economic history.]

“Japanese Lifetime Employment: A Century’s Perspective” (with Hiroshi Ono) in Institutional Change in Japan, edited by Blomstrom and La Croix (New York; Routledge), 2006.

The economic stagnation in the 1990s in Japan posed a serious challenge to the practice of lifetime employment. Despite pessimistic predictions, however, empirical studies so far have found no major changes to the practice pertaining to core employees. Why does lifetime employment persist in Japan? In this paper, we develop a conceptual framework motivated by personnel economics and sociology and study the persistence and stability of Japanese lifetime employment from a historical perspective. We not only view lifetime employment as a set of complementary human resource management (HRM) practices surrounding an implicit and long-term employment contract, but also examine these HRM practices within the context of an employment system in which micro-level practices interact with macro-level institutions. Using this framework, we study the formation and transformation of lifetime employment over the 20th century, focusing on key historical events such as the 1929 depression, postwar U.S. occupation, oil crisis, and the post-bubble recession. Our analysis shows that lifetime employment is a product of dynamic interactions among labor, management, and government in response to exogenous shocks. The practice evolved gradually into a cluster of HRM policies, which was further reinforced by the endogenous formation of labor laws, state welfare system, and social norms. As a result, today’s Japanese lifetime employment is deeply embedded into complementary practices and institutions, resulting in its resilience and stability.

The Evolution of Employment Relations in U.S. and Japanese Manufacturing Firms, 1900-1960. NBER Working Paper No. 7939, October 2000. [Revised version under review.]

Using a game-theoretic framework, this paper presents a comparative analysis of the dynamic evolution of the employment systems in the U.S. and Japan from 1900 to 1960. Viewing employment systems as equilibrium outcomes of the strategic interactions among management, labor, and government, I document (1) similar initial conditions in the two countries circa 1900 characterized by spot wage contracts, (2) parallel institutional developments in the 1910s and 1920s towards long-term employment, (3) the process of bifurcation triggered by the differential impact of the Great Depression in the two countries, and (4) further divergence due to government regulations during WWII. By the 1960s, the two countries reached two different but stable equilibria that consisted of a set of complementary institutions including corporate personnel practices, union laws, and state welfare policies.

2. The Evolution of Income Inequality in a Comparative Historical Perspective
In this project, I study the long-run evolution of income inequality in Japan, measured by top income shares, and compare Japan’s historical experience with that of leading industrial countries, such as the U.S., Britain, France, Germany, and Sweden. The comparative historical data are used to investigate the relationships between inequality and growth and the causes of the long-run changes in income inequality.

The Evolution of Income Concentration in Japan, 1886-2005: Evidence from Income Tax Statistics (with Emmanuel Saez). Forthcoming in Review of Economics and Statistics. [July 2007 version with revised and updated 1886-2005 data.] [NBER Working Paper version]

This paper studies the evolution of income concentration in Japan by constructing long-run series of top income shares and top wage income shares using income tax statistics. We find that (1) income concentration was extremely high throughout the pre-WWII period; (2) a drastic de-concentration of income at the top took place during WWII; (3) income concentration remained low in 1945-2005 with a modest but steady increase in the last decade; and (4) top income composition in Japan has shifted dramatically from capital income to employment income over the course of the 20th century. We attribute the drastic fall in the top 1% income share during WWII primarily to the collapse of capital income due to wartime regulations and inflation. We argue that the change in the institutional structure under the occupational reforms made the one-time income de-concentration difficult to reverse. In contrast to a sharp increase in wage income inequality in the U.S. in 1970-2005, top wage income shares in Japan have remained relatively stable. We show that the change in technology or tax policies alone cannot account for the comparative experience of Japan and the U.S. Instead we suggest that institutional factors such as internal labor markets and union structure are important determinants of wage income concentration.

The Evolution of Top Wage Incomes in Japan, 1951-2005 (with Emmanuel Saez). [Preliminary draft in September 2007] [Work in progress]

Recently, there has been an increasing concern among the Japanese that income inequality is rising. In a preliminary study, we find that the top wage income share in Japan has increased sharply since 1997 for the top 0.1% group, which roughly corresponds to executives in 5,000 largest corporations. To investigate whether the recent change is a break from the past or can be explained by changes in economic factors, we are studying the long-run determinants of top wage income shares using multivariate regressions. In particular, as one of the dependent variables, we estimate effective marginal tax rates for different wage income groups to assess the impact of tax reforms.

3. Child Adoption in the U.S. from a Comparative Historical Perspective
In this project, I study the economics of child adoption using historical and contemporary data in the U.S. and a new theoretical framework. I also compare adoption markets in the U.S. and Japan and examine the sources of institutional variations and their impacts on adoption outcomes.

The Economic Analysis of Child Adoption in the U.S. (with Raquel Bernal, Luojia Hu, and Eva Nagypal). NSF Grant Proposal in January 2007. [Grant SES-0721137 awarded for 2007-2008. ]

Today, adopted children comprise roughly 2.5% of all children in U.S. households, and more than 20,000 children are adopted from abroad by Americans each year. Despite its quantitative significance and potentially important welfare implications for the families involved, child adoption has received surprisingly little attention from economists. In this project, we propose the first systematic economic analysis of child adoption in the U.S. First, we document historical trends by adoption types and explore whether these trends can be explained by changes in key demographic, social, and economic variables. Second, using two micro datasets, NSFG and SIPP, we investigate what determines the demand for and supply of adoptable children by estimating the effects of various socio-demographic characteristics of individuals on the likelihood of adopting and relinquishing children. Third, we develop a theoretical framework to study adoption seeking, in which adoption is explicitly modeled as an alternative to child bearing. This model is fit to basic features of adoption and fertility in the U.S. and then used to simulate the effects of adoption-related policies.

Child Adoption in the U.S.: Historical Trends and the Determinants of Adoption Demand and Supply [Preliminary draft for the AEA Meetings in January 2008.]

Adoption, as an alternative to child bearing, is a widely accepted means of forming a family in the U.S. In this paper, we first provide a comprehensive overview of the U.S. adoption market and its historical development. We then document trends in the U.S. by adoption type using aggregate-level data from 1951 to 2002 and explore possible reasons for the observed historical patterns. Finally, compiling two micro-level datasets covering the period between 1973 and 2002, we estimate individuals' propensities to adopt and to relinquish a child for adoption, and evaluate alternative hypotheses concerning adoption demand and supply, exploiting both across-time and across-group variation in the data.

A Comparative Analysis of Child Adoption in the U.S. and Japan [Presentation slides in May 2007] [Work in progress]

While child adoption has been a widely accepted means of family formation in the U.S. for several decades, it is much less so in Japan. It was not until 1987 that the law enabling permanent transfer of parental rights from biological to adoptive parents was enacted in Japan. In this paper, I estimate adoption rates and compare the nature of adoption markets in the two countries. I find that the number of formal (legally approved) child adoptions per 1,000 births in 2000 was only 1.6 in Japan in contrast to 31.4 in the U.S. The data indicate that the much lower adoption rate in Japan can be attributed primarily to low demand for adoptable children, rather than low demand for children in general or supply-side constraints.

B. Other Publication

Two-Part Marginal Cost Pricing in a Pure Fixed Cost Economy Journal of Mathematical Economics 26: 363-385, 1996.

In this paper, I examine the optimality and existence of two-part marginal cost pricing (in which firms charge non-uniform access fees to their customers in addition to a unit price equated with marginal cost) in a general equilibrium setting where technologies are non-convex. I show that two-part marginal cost pricing is indeed an optimal pricing regulation for natural monopolies when increasing returns to scale arise solely from the presence of fixed costs. I then provide a sufficient condition for the existence of two-part marginal cost pricing equilibria under the bounded losses condition, generalizing the result of Brown et al. (1992).

C. Book Review

Review of Japanese Economic System and its Historical Origins (edited by Tetsuji Okazaki and Masahiro Okuno-Fujiwara; Oxford University Press, 1999). Journal of Economic Literature 38(3): 986-988, 2000.