Short-run Employment Functions for the Japanese, Korean, and Taiwanese Manufacturing Industries: An Interrelated Factor Demand Model

The purpose of this paper is to estimate a dynamic employment function in the interrelated factor demand model for the high growth economies of Japan, Korea and Taiwan. Some of important findings show particularly marked differences in the short-run adjustments of production labor among the countries concerned. The output elasticities of the Japanese and Taiwanese labor markets are significantly lower than that of Korea. It is the Korean labor market that exhibits fast adjustments of production labor in the short-run. In contrast, the stable condition of the Japanese labor market is mainly due to the slow adjustment of the production labor. The short-run overadjustment of the production labor in Korea represented by the high output elasticity, together with the low level of wage elasticity, suggests that the production labor market absorbed substantial burdens of the factor market adjustments from output fluctuations. In addition, the estimated cross adjustment coefficients are generally found to be much higher for the NICs of Taiwan and Korea than those of Japan, which implies that dynamic intermarket spillover effects in these countries are stronger than those of Japan.