DPRIETI Discussion Paper Series 12-E-079

Effect of Work-Life Balance Practices on Firm Productivity:
Evidence from Japanese firm-level panel data
YAMAMOTO Isamu
Keio University

MATSUURA Toshiyuki
Keio University

The Research Institute of Economy, Trade and Industry

http://www.rieti.go.jp/en/

RIETI Discussion Paper Series 12-E-079
December 2012

Effect of Work-Life Balance Practices on Firm Productivity:
Evidence from Japanese firm-level panel data
YAMAMOTO Isamu*
Keio University

MATSUURA Toshiyuki
Keio University

Abstract
This paper examines how firm practices that could contribute to worker attainmentof work-life balance (WLB) affect the total factor productivity (TFP) of a firm, byusing 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 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—large,
manufacturing, and have exhibited labor hoarding during recessions—we foundpositive and sizable effects. 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 decreasein turnover or an increase in recruiting effectiveness.
Keywords: Work-life balance, TFP, Fixed employment costs
JEL classification : D24, J24, J81
RIETI Discussion Papers Series aims at widely disseminating research results in the form of professional
papers, thereby stimulating lively discussion. The views expressed in the papers are solely those of theauthor(s), and do not represent those of the Research Institute of Economy, Trade and Industry.
This study is based on microdata from the Basic Survey of Japanese Business Structure and Activities by
the Ministry of Economy, Trade, and Industry, Japan, and an original survey co-sponsored by the
Research Institute of Economy, Trade, and Industry (RIETI) and the Economic and Social ResearchInstitute. We are grateful to the institutes for their support. We thank Fumio Ohtake, Hank Farber, Lisa
Kahn, Takao Kato, Sachiko Kuroda, Masako Kurosawa, Masaaki Mizuochi, Emiko Takeishi, Yukiko
Yokoyama, as well as the member of the RIETI project and the participants of the 14th Labor Economics
conference as well as Trans-Pacific Labor Seminar 2012, for their valuable comments. Because the data
used in this study were obtained only by signing a confidentiality agreement, the authors are unable torelease them.
*

Corresponding author: yamamoto@fbc.keio.ac.jp

11. Introduction
In response to the increasing need for work−life balance (WLB) of workers, anincreasing number of firms are adopting practices that contribute to the attainment ofworker WLB. These practices include child-care or family-care leave programs, flexible
working arrangements, and the establishment of departments for promoting WLBpractices. Do firms implement these WLB practices to attain firm benefits such as
productivity increases or competitive advantages? Many studies in business and labor
economics literature have investigated the relationship between WLB practices and firm
performance measures, such as worker morale, turnover, stress, and absenteeism, as
well as firm profit and productivity. However, their results have been rather
inconclusive.1 For example, Konrad and Mangel (2000) show that WLB practices havea positive impact on firm productivity. In contrast, in a study of 732 manufacturingfirms in the United States, France, Germany, and the United Kingdom, Bloom et al.
(2009, 2011) find no relationship between WLB practices and firm productivity whenmanagement practices are controlled.2
The literature suggests that WLB practices potentially improve firm
performance by reducing worker turnover and absenteeism and by enhancing recruiting
effectiveness. However, considering that the adoption rates of WLB practices are
generally low, we determine the presence of certain firm characteristics that help WLBpractices to significantly improve firm performance. For example, the larger the firm’s
fixed employment costs, the more they benefit from WLB practices. Specifically, forfirms that invest intensively in firm-specific skills for their workers or those that incurlarge hiring costs, WLB practices are more cost effective because they can save on theadjustment cost of employment and earn returns on the firm’s human investment as
WLB practices decrease turnover and absenteeism. Thus, we conjecture that certain
firm characteristics contribute to the positive effects of WLB practices on firm
productivity making such firms more likely to adopt them.
By focusing on firm characteristics, such as fixed employment costs, we
examine the effects of WLB practices on firm productivity using panel data of Japanesefirms for the years1992, 1998, 2004, 2007, and 2008. As a direct measure of firm
productivity, we use total factor productivity (TFP), which is consistently estimated byapplying the methodology used in Levinsohn and Petrin (2003). Because TFP reflects afirm’s technology level and growth potential over the medium and long run, we believe1

Freeman and Shaw (2009) suggest that there is considerable heterogeneity or variation inbusiness practices and performances across countries, firms, and establishments, as well as
among workers within establishments.
2
Other studies include Milliken et al. (1998), Perry-Smith and Blum (2000), Batt (2002), andGray and Tudball (2003).
2

that it is a reliable measure for identifying the effects of WLB practices on firm
performance. An advantage of using Japanese firm data is that many firms in Japan
incur large fixed employment costs. Japanese firms have long emphasized employee
training in order to help workers accumulate firm-specific human skills (e.g., Mincerand Higuchi, 1988). Thus, by observing firm behavior, we identify the firms that incurlarge fixed employment costs and examine whether WLB practices have large effects on
those firms.
One disadvantage would be that many large and/or high-performance Japanesefirms might have adopted WLB practices as a part of corporate social responsibility(CSR) because of the increasing social pressure to promote WLB practices in theJapanese society.3 If so, we need to consider the reverse causality that firms with higher
productivity are more likely to implement WLB practices. In order to cope with thereverse causality or the endogeneity of WLB practices, we control for time-invariant
firm characteristics using the fixed-effect estimation. Because, generally, large firms andhigh-performance firms have higher productivity potential, the fixed-effect estimation
can consistently remove the reverse causality as long as this feature does not changeover time. We also check for robustness of the estimation result to possible time-varying
factors that could affect both the firm’s adoption of WLB practices and productivity.
A few studies have employed firm panel data to examine the relationshipbetween WLB practices and productivity. For example, after examining firm panel datain the US pharmaceutical industry, Shepard et al. (1996) find a positive effect of flexible
work hours on firm productivity. Giardinia and Rüdiger (2008) use two-year panel dataof 118 organizations to measure the effects of work–family practices on absenteeism
and other firm performance measures. Our study differs from these studies. First, we
focus not only on flexible work but also on many other WLB practices, such as
child-care leave programs or the establishment of a department that promotes WLB
practices. Second, as a direct measure of firm productivity, we use unbiased andconsistent firm TFP estimates determined using the method proposed by Levinsohn andPetrin (2003). Third, our firm panel data has a relatively larger sample size (1,677 firms).
Therefore, we believe that this study contributes to the causal relationship findings.
The main findings of this study are as follows. First, although we observe a
positive correlation between firms’ WLB practices and TFP, we find no causal
relationship in which WLB practices increase firms’ TFPs after controlling forunobserved firm heterogeneity. Similar findings have not been obtained in previous
studies because the present study utilizes the longitudinal nature of firm data to identify
the causal relationship. Second, we find positive and sizable effects for the following
3

In Japan, the government, together with employers and labor union circles, formulated a
Charter for Work-Life Balance and an Action Policy for Promoting Work-Life Balance in 2007
to promote the concept of WLB among employers and employees.
3firm types: large firms, manufacturing firms, firms that exhibit labor hoarding during
recessions, and firms that use electronic commerce. These results are robust against
time-varying factors that could result in endogeneity in the adoption of WLB practices,
the choice of firm productivity measure, and the estimation strategy. For the types of
WLB practices, we conclude that the establishment of a department that promotes WLB
practices and organizational efforts to reduce overtime as well as promotes child- andfamily-care leave over the legal minimum, tends to improve firms’ productivity. In
addition, we conclude that the generation of positive effects of WLB practices takes
time. One of the interpretations of the results emphasized is that labor-hoarding firms
are likely to incur large fixed employment costs, and therefore we conclude that firms
investing in firm-specific human skills or those that have large hiring/firing costs could
benefit from WLB practices by a decrease in turnover or increase in recruiting
effectiveness.
This paper is divided as follows. Section II explains the potential channels for
WLB practices to increase firm productivity and describes the empirical specification to
identify the effects of WLB practices on TFP. Section III describes our data and thevariables used in the estimation. Section IV shows the estimation results. Section V
concludes.

2. Framework
2.1 Potential channels to increase firm productivity
According to Baughman et al. (2003), WLB practices can increase firm productivity
through the following four channels: enhancing worker morale, reducing turnover rates,
reducing absenteeism, and enhancing recruiting effectiveness. Previous studies
conducted have focused on each of the channels (Dalton and Mesch 1990 and Giardinia
and Rüdiger 2008), while other studies have focused on direct measures of productivity(for example, Shepard et al. 1996 and Bloom et al. 2009).
Although it is important to identify each of the channels, we differentiate themethods used in this study from those of previous studies by examining a direct
measure of productivity, TFP, to ascertain whether WLB practices have an overallcausal effect on firm productivity as a result of all four channels. If the adoption of
WLB practices improves firm production efficiency through one of the channels, TFP
would increase with other conditions being equal. In contrast, if a WLB practice resultsin large monetary and nonmonetary costs, including production inefficiency, TFP will
decrease.
In addition, we examine firm characteristics that contribute to the increasing
effects of WLB practices on firm TFP. These include firm size, industry, information
technology (IT) usage, and fixed costs of employment. Among them, we especially4focus on fixed employment costs such as training and investment costs in firm-specificskills and hiring/firing costs. Among the four channels for increasing firm productivity,
the extent of benefits from reduced turnover and increased recruiting effectivenessshould depend on the fixed employment costs. That is, for firms that incur low fixed
employment costs, a decrease in turnover rate or an increase in recruiting effectivenesswill not necessarily result in large benefits because they can replace new workers at a
relatively small cost. However, these are expected to be very beneficial for firms withlarge fixed employment costs by reducing turnover and improving recruiting
effectiveness because they can save more on fixed employment costs. Therefore, it ismeaningful to conjecture that firms that incur larger fixed employment costs would
benefit from adopting WLB practices through the channels of reduced turnover andimproved recruiting effectiveness. As a simple measure of a firm’s fixed employment
costs, we use a firm’s relative volatility of employment to output for the past decade,which is expected to vary depending on the extent of labor hoarding during recessions.
2.2 Empirical specifications
We use a two-step approach in the estimation. First, we estimate the production function
using the method proposed by Levinsohn and Petrin (2003) to derive TFP on an hourly
basis. Second, we estimate the effects of WLB practices on TFP by regressing thevariables for WLB practices on the estimated TFP.
We first consider the following production function.
Yit  f ( Ait (WLBit , i , trend ), Lit , K it ) ,(1)

where Yit is value added, Ait is TFP, Lit is man-hour labor input, Kit is capital input,
WLBit is a variable indicating WLB practices adopted by firm i until year t, ηi isfirm-specific characteristics, and trend is the time trend term.
A key issue in the estimation of the production function at the firm level is thecorrelation between unobservable productivity shocks and input level. Firms expand
their input in response to a positive productivity shock. Unless controlling for anunobservable productivity shock, ordinary least square (OLS) estimates suffer an
endogenous bias that stems from the correlation. Many alternatives to OLS have beendeveloped; the Olley and Pakes (1996) methodology is one of the more popular
alternatives. Their methodology uses investment as a proxy for these unobservableproductivity shocks. However, investment is very lumpy, especially for small andmedium firms that do not annually conduct fixed capital investments. Thus, theinvestment proxy is only valid for large firms that report non-zero investments.
Levinsohn and Petrin (2003) show that intermediate inputs can solve the simultaneity
problem. Thus, this approach should provide a better measure of unobservable shocks.
5This paper uses the Levinsohn and Petrin technique for estimating TFP at the firm level
because our sample includes small and medium firms that report zero investment.
When estimating firm-level TFP, we distinguish between regular and part-timeworkers and consider the number of working hours by these workers. It is usual forlabor input to be measured by the number of employees because of data limitations.
However, because some WLB practices are intended to encourage employees to reduce
overtime hours, it is important to consider the changes in working hours. Because ourdata contains the average hours worked, we construct a man-hour base labor input
indicator and use it when estimating firm-level TFP.
Instead of directly estimating equation (1), we first estimate the production
function using the Levinsohn and Petrin methodology and define firm-level TFP as aresidual according to equation (2).
Ait  f 1 (Yit , Lit , K it )(2).

Then, we run the regression model represented by equation (3) and examine whether
WLB practices affect TFP.

Ait  g (WLBit , i , trend )(3)

It is important to control for firm-specific characteristics in equation (3)because of the possibility that WLB practices have been adopted more by large andhigh-performance firms. High-performance firms may be able to afford the introductionof WLB practices. Alternatively, larger firms may face the social pressure to adopt WLBpractices as a part of CSR. Therefore, if firms with potentially higher TFP adopt more
WLB practices, the WLB practice variable (WLBit) should be regarded as endogenous,
that is, not independent of firm-specific characteristics (ηi). Using fixed-effectestimation, we control for firm-specific characteristics, such as time-invariant firm
performance or firm size, and derive consistent estimates to identify the causal effects of
WLB practices on TFP. It is also important to account for time-variant factors that could
bring about reverse causality. For instance, a firm facing positive demand or
productivity shocks may adopt more WLB practices in order to recruit more number ofskilled workers. Therefore, as a robustness check, we control for intermediate inputs
that can be proxy variables of demand or productivity shocks by using the method of
Levinsohn and Petrin (2003). Specifically, we include the cost of information
processing and communication in equation (3) as is done by Kawaguchi (2007).

6

3. Data and basic facts
3.1 Data
The data used in this paper is obtained from the Basic Survey of Business and Activities(BSBA) conducted by the Ministry of Economy, Trade and Industry (METI). The BSBA
is an annual panel survey that began in 1991 and gathers representative statistics onJapanese firms with 50 or more regular employees, including those engaged in mining,
manufacturing, electricity and gas, wholesale, retail, and several service industries. The
survey captures a comprehensive picture of Japanese firms, including their basic
financial information, business composition, R&D activities, IT usage, and foreign
direct investments.4 Note that the industry composition of the BSBA is more or lessdifferent from all industries conducting business in Japan. Because the BSBA is
conducted by METI, the surveyed firms are concentrated in the manufacturing andwholesale/retail sectors. For example, the percentages of the manufacturing andwholesale/retail sectors in 2007 in the BSBA are 56.8% and 36.4%, respectively, while
those in the Establishment and Enterprise Census, collected by the Statistics Bureau, are29.4% and 23.2%, respectively. Therefore, it should be noted that the conclusions
obtained in this study are derived from data that is concentrated in the two
above-mentioned sectors.
Because the BSBA contains no information about firm WLB practices, we use
the original survey of the firms, the Work-Life Balance Survey in Japan and Europe(WLB-JE), designed to survey the BSBA’s respondent firms on their WLB practices. In
the WLB-JE, the firms are asked when and what type of WLB practices they haveintroduced, as well as labor-related information, such as the average working hours in
the past (1992, 1998, 2004, 2007, and 2008) and about human resource management
attitudes. 5 Because we can perfectly match the WLB-JE with the BSBA using
information on the names and addresses of the firms, it is possible to prepare long-run
firm-level panel data from the late 1990s for TFP on an hourly basis and WLB practices.
The questionnaire of the WLB-JE was sent to 9,628 firms in December 2010, of which
1,677 firms participated, which corresponded to a 17.4% response rate.
It should be noted that the WLB-JE contains no information on the eligibility
for each WLB practice. Thus, the variables regarding WLB practices do not necessarilyreflect the actual performance of these employees, and thus we cannot rule out the casethat the practice is not applied to most of the employees, even if it is introduced.
An obvious drawback of the reliance on the WLB-JE is a potential selection
bias due to the low response rate. Because the title of the survey includes the term
4

For more details on the BSBA, see Morikawa (2010).
The WLB-JE was conducted by the Research Institute for Economy, Trade, and Industry(RIETI) of METI.

5

7

“work-life balance,” it is likely that those firms that employed increasing WLBpractices tended to reply to the survey. However, the response rates do not vary
according to firm size. Moreover, the sample means and standard deviations of the key
variables used in the analysis below are not very different between the responding firms
and others.6 Furthermore, more than 30 questions were asked to each firm via mail,many of which were related to human resource management. Thus, we regard that aheavy response burden might have brought about a low response rate, in which case theselection bias might not have been sizable.
Another drawback is the potential retrospective bias for WLB practices’ year of
introduction. Because we extract information regarding the adoption of WLB practice ineach year from retrospective questions (when each WLB practice was introduced), wecannot rule out a recall bias. However, it is likely that many WLB practices wereintroduced as a part of the personnel management system, such as the child-care leavesystem, the flextime system, and the establishment of a department to promote WLBpractices. We suggest that reports involving such recall might suffer from relatively
small retrospective bias. We therefore take advantage of retrospective recall tocomplement the lack of longitudinal information for the adoption of WLB practices.
3.2 TFP and WLB variables
Variables related to TFP, such as value added, labor input, and capital stock, areobtained mainly from the BSBA. We calculate value added by subtracting the costs forthe intermediate inputs from a firm’s total sales. As for intermediate input, we calculate
it as follows: Cost of sales + Operating costs − Wage bills and Depreciation costs. Bothsales and intermediate input costs are deflated by the output and input deflators of theJapan Industry Productivity (JIP) Database.7 We use the deflated Tangible Asset as aproxy for capital stock. The capital stock deflator is calculated at the industry level as
the ratio of capital stock to tangible assets based on Financial Statements Statistics ofCorporations by Industry (Ministry of Finance).
As for labor input, we obtain detailed information from the BSBA, the
WLB-JE, and the Monthly Labor Survey (Ministry of Health, Labour and Welfare). We
use the BSBA to determine the number of regular and part-time workers. Data on
6

Descriptive statistics for the key variables as of 2007 are as follows (standard deviations are inparenthesis): The number of workers is 613 (1,967) for respondents and 616 (2,269) for
non-respondents, the ratio of manufacturing firms is 0.56 (0.50) and 0.45 (0.50), the value
added is 6,528 (31,078) and 5,672 (31,823), and the relative volatility of employment to output
× 100 is 0.013 (0.024) and 0.016 (0.027).
7
The JIP Database is a semi-macro-level productivity database provided by the RIETI. It
contains information on output, intermediate inputs, capital stock, and labor input for 108
industries for 1970 to 2008. For more details, see the RIETI website:
http://www.rieti.go.jp/en/database/JIP2011/index.html
8average working hours for regular workers are available at the firm level in WLB-JE.
As for average working hours, we first calculate the ratio of working hours for part-timeworkers to those for regular workers by industry based on the Monthly Labor Survey
and then multiply them by firm-level working hours for regular workers. We regard
firm-level labor input as a sum of the total working hours for regular workers andpart-time workers. Because WLB-JE collects information on working hours only for the
past five years, we restrict our sample to 1992, 1998, 2004, 2007, and 2008 and estimate
the TFP.
We focus on the following WLB practices: 1) child-care leave above the legal
minimum, 2) family-care leave above the legal minimum, 3) short-term working system(other than child-care and family-care leave), 4) flextime system, 5) limiting work
location within the local area, 6) establishment of a department to promote WLBpractices, and 7) organizational efforts to reduce overtime. Because the types of WLBpractices vary, we first focus on the WLB practice index, which is the number of WLBpractices that a firm adopted until the previous year. We also focus on each of theindividual practices and examine how the effects of WLB practices evolved over theyears after its adoption.
3.3 Basic facts
The summary statistics for a firm’s TFP and for the seven WLB practices are
summarized in Table 1. In addition, Figure 1 makes a yearly comparison to determine
the relationship between TFP and each WLB practice.
In Figure 1, the bar graphs indicate the adoption rates of the WLB practice(right axis), while the line graphs indicate the average TFP levels in 1998, 2004, 2007,
and 2008 for the following four firm groups (left axis):8 1) firms that adopted the WLBpractice before 1997, 2) those that adopted it between 1998 and 2003, 3) those that
adopted it between 2004 and 2008, and 4) those that have not adopted it. A white plotmeans that the WLB practice is not adopted at that time, whereas a colored plot meansthat it has been adopted.
When analyzing Table 1(1) for WLB practice 1 (child-care leave above thelegal minimum), we observe that the adoption rates were generally low but increased
from 1998 (less than 10%) to 2008 (about 20%). Moreover, the average TFPs for thefirms that had not adopted the WLB practice were generally lower than those that
adopted it. For example, the firms that adopted WLB practice 1 before 1997 (plotted inblack triangles) experienced higher TFP levels as well as larger TFP growth than thefirms that did not.
However, for firms that adopted the practice between 1998 and 2003 (plotted in
8

Because the adoption rates of WLB practices were generally very low in 1992, we used thedata from 1998 in Figure 1.
9

black squares) or between 2004 and 2006 (plotted in black circles), the increase in TFP
after adoption was not necessarily evident compared with other firms. It is alsointeresting to note that the TFPs of these firms were already higher before they adopted
WLB practice 1. This implies that WLB practice 1 does not markedly influence theincrease in a firm’s TFP. Instead, firms with higher productivity potential may haveadopted it. This is regarded as evidence for the reverse causality that should beconsidered in the estimation. A similar feature is applied to the analyses of the other
WLB practices in Figure 1 (2–7). That is, the adoption rates of the WLB practices weregenerally low, and the TFPs did not necessarily increase after their adoption.
However, Figure 1 illustrates several cases in which a WLB practice might
have increased the TFP. For example, the average TFP for firms that adopted WLBpractice 6 (establishment of a department to promote WLB practice) between 1998 to2003 (plotted in black squares) or 2004 to 2006 (plotted in black circles) increased more
after its adoption compared to those that did not adopt it. Likewise, firms that adopted
WLB practice 7 (organizational efforts to reduce overtime hours) between 2004 and2006 (plotted in black circles) experienced higher TFP growth in 2007 and 2008.
Furthermore, for firms that adopted WLB practice 7 between 1998 and 2003, the TFP
did not change immediately after the adoption in 2004, but increased considerably in2007 and 2008. This observation indicates that it takes time for the WLB practices toincrease TFP.
In summary, the following results are shown in Figure 1. First, the adoption
rates of WLB practices were generally low but witnessed a gradual increase during thepast decade. Second, the firms that adopted WLB practices tended to have higher TFPs,
but their TFPs were already higher before the adoption of the WLB practices, indicating
evidence of reverse causality. Third, several cases were observed in which WLBpractices increased the firm TFP after the adoption, but the effects were delayed.
Considering these findings, we examine the effects of WLB practices on firm TFP, as
described below.

4. Estimation results
4.1 Effect of WLB practices on TFP
To examine the effects of WLB practices on TFP, we estimate equation (3) using
Japanese firm panel data for 1998, 2004, 2007, and 2008. The main estimation results
using an index for the number of adopted WLB practices as explanatory variables areshown in Table 2.
The first column in Table 2 shows the estimation results of the random-effectmodel in which time-invariant firm-fixed effects are not controlled. We find asignificantly positive coefficient for the WLB practice index, indicating that more WLB
10

practices are associated with higher TFP. However, after controlling for thetime-invariant firm-fixed effects in the second column, we find that the WLB practiceindex is insignificant. This result implies that there is no causal relationship in which the
WLB practices increase firm TFP after controlling for the time-invariant endogeneity inadopting WLB practices. We infer that the positive correlation between WLB practices
and TFP shown in the first column of Table 2 is most likely due to reverse causality,
wherein firms with potentially higher productivity tend to adopt more WLB practices.
Considering the low adoption rates of WLB practices shown in Table 1, theseestimation results seem sensible because more firms should have adopted thesepractices if there was a strong causal relationship in which WLB practices increased
firm TFP. However, WLB practices might have had some positive effects on TFP
depending on firm characteristics. In order to investigate this, we added cross terms of
the WLB practice index with several firm characteristics to the fixed-effect estimations,the results of which are shown in the columns 3–6 in Table 2.
The third and fourth columns show the estimation results when we add thecross terms for large firm dummies (those with more than 300 employees) andmanufacturing dummies, respectively. In either case, we observe positive significant
coefficients for the cross terms, indicating that WLB practices have positive effects onfirm productivity, given that the firm has more than 300 workers or it is part of the
manufacturing industry. One of the features commonly observed for large andmanufacturing Japanese firms is labor hoarding. Because the BSBA records annual
information on total sales and the number of regular employees of each firm, we areable to calculate the volatility of regular (permanent) employees relative to output: thevariance of the number of regular employees divided by that of total sales during theperiod 1998–2008. Using this variable as a proxy for the degree of employment
adjustment (or the inverse of labor hoarding for regular employees), we are able tocompare firm behavior for labor hoarding. It is shown that the relative volatility of
regular employment to output for manufacturing firms with more than 300 workers issmaller than that for other firms.9 This indicates the possibility that WLB practices
have greater effects on TFP in labor-hoarding firms.
The fifth column of Table 2 shows the estimation results after we add a crossterm with a dummy variable for labor hoarding, which takes the value of 1 if a firm hasa relative volatility of regular employees less than the median and 0 otherwise. The
table shows that the coefficient of the cross term is significantly positive. This result
implies that the more the firms incur large fixed employment costs, the more they
benefit from WLB practices because those practices decrease turnover and absenteeism.
Therefore, firms can save on the adjustment costs of employment or earn returns on
9In particular, the median of relative variance was 0.0048 for manufacturing firms with morethan 300 workers and 0.0056 for other firms.
11human investment.
In the last column of Table 2, we include a cross term of an IT-usage variable
that takes the value of 1 if the firm used electronic commerce and 0 otherwise. We finda significantly positive coefficient for the cross term, implying that higher IT
concentration allows firms to take greater advantage of WLB practices.
In summary, Table 2 suggests the following results. First, we observe a positive
correlation between WLB practices and firm productivity. Second, by controlling fortime-invariant firm heterogeneity, we cannot confirm a causal effect of WLB practices.
Third, for firms with certain characteristics, such as large size, manufacturing focus,
labor hoarding, and IT use, WLB practices enhance firm productivity. We next checkthe robustness of these results, as described in the next section.
4.2 Robustness checks(1) Time-varying controls
Although we controlled for time-invariant firm heterogeneity, such as higher
productivity potential, it is also important to control for time-varying factors, such as
demand or productivity shocks, which could affect both the firm’s decision to adopt
WLB practices and its productivity. To account for this, we use an approach similar to
Kawaguchi (2007) who examines whether a higher proportion of female employees
increased a firm’s profit. Based on the idea of Levinsohn and Petrin (2003), Kawaguchi(2007) controls for an intermediate input and capital stock so that unobserved demandor productivity shocks do not produce endogeneity in the female proportion.
Following Kawaguchi (2007), we assume that the intermediate good’s demand(Mit) is determined by fixed input, capital stock (Kit), and unobserved shock (vit) as Mit =m(vit, Kit). Then, the unobserved shocks, vit, can be expressed as a monotonic function of
Mit given Kit (vit = m–1(Mit, Kit)). As a proxy for intermediate goods (Mit), we use a ratio
of information processing and communication cost to total production cost (IC), thesquared deviation from the sample mean of IC, and the deviation from the sample meanof IC multiplied by the asset-sales ratio, as suggested by Kawaguchi (2007). The key
presumption is that information costs respond more rapidly to unobservable shocks than
to total production costs.
According to this specification, equation (3) is estimated with time-varying
controls, as shown in Table 3. Table 3 shows that many proxy variables for demand or
productivity shocks are significant. Nonetheless, the estimated coefficients of the WLBpractice index and its cross terms for firm characteristics are very similar to those in
Table 2. This result implies a robustness of the main results to the possible endogeneity
resulting from time-varying factors, such as demand or productivity shocks.

12(2) Productivity measures
As a firm’s productivity measure, we adopt the TFP that was estimated by the method of
Levinsohn and Petrin (2003). To check for the robustness to the choice of productivity
measure, we calculate the estimation results using labor productivity and TFP derived
by the method of Wooldridge, Levinsohn, and Petrin (WLP) as dependent variables,
respectively, as shown in Tables 4 and 5. Labor productivity is calculated as the value
added divided by the man-hour labor input. The TFP based on the WLP method is a
Wooldridge (2009) modification of the Levinsohn-Petrin TFP estimator. This estimatortakes into account the simultaneity of inputs and productivity and is known to be robust
to the critiques by Ackerberg et al. (2006).10
Tables 4 and 5 show similar coefficients for the variables related to WLBpractices, and therefore confirm the robustness of productivity measures.
(3) Differences in difference estimation
Lastly, as a similar estimation strategy, we use a difference-in-differences estimation tocompare year-to-year changes in TFPs between the firms with WLB practices andothers. In order to conduct a difference-in-differences estimation, we focus on WLBpractice 6 (Establishment of a department to promote WLB practices) and examine thedifferences from year 2004 to 2008. WLB practice 6 is chosen because this practice isregarded as the most advanced and aggressive in the attainment of WLB by
employees.11 We then derive the average treatment effect of this WLB practice on TFP
by estimating the following equation:

Ait  (   Ci )Wit  T   Wit ,T ,(4)

where Wit is a dummy variable that takes the value of 1 if the firm adopts WLB practice
6 until the previous year, Ci is the firm characteristics examined above (large firm
dummy, manufacturing dummy, labor-hoarding dummy, or IT-usage dummy), and T is ayear dummy for 2008. We interpret the estimated coefficient (α + α’Ci) as the averagetreatment effect.
In estimating equation (4), we use the propensity score for adopting the WLBpractice. That is, we derive the propensity score weighted least-square (WLS) estimates
based on Hirano and Imbens (2001). We define propensity score ei as the probit
10

For details of TFP on WLP, see Petrin and Levinsohn (2012). We use the stata code provided
by Amil Petrin’s web site.
11
WLB practice 6 may include unobserved WLB practices or it could be a proxy of the actual
adoption of the practice.
13

estimate of the probability to adopt the WLB practice using average hours worked,
capital-labor ratio, firm size and industry dummies, and firm age as explanatory
variables. Then, we calculate the weight i from propensity score ei as
i  Wi ei  (1  Wi ) (1  ei ) and use this weight in the estimation. The underlying
concept is to compare the TFP growth of the firms with those of similar firms byassigning heavier weights to those firms that adopt the practice but have similar
characteristics to the firms that did not adopt the practice (firms with a low propensity
score) and vice versa.
The estimation results of equation (4) are summarized in Table 6.12 Although
the cross term with the IT-usage dummy is insignificant, the table indicates that most of
the results did not greatly differ from those obtained in Table 2, that is, the WLBpractice itself did not have an effect on the TFP, but for large, manufacturing, orlabor-hoarding firms, the practice could significantly increase the firm’s TFP after
adoption.
4.3 The effect of each WLB practice and its lag structure
We compare the effects of each of the seven WLB practices on firm TFP. We estimate
equation (3) for each WLB practice; Table 7 summarizes the estimated coefficients andstandard errors of each practice along with its cross term of firm characteristics. Table 7
shows that no WLB practice by itself has significantly positive effects on firm TFP.
However, if combined with particular firm characteristics, such as large size,
manufacturing, labor hoarding, or IT usage, positive effects are observed, especially for
WLB practices 1 (child-care leave above legal minimum), 2 (family-care leave above
legal minimum), 6 (establishment of a department to promote WLB practice), and 7(organizational efforts to reduce overtime).
In addition, we consider the possibility that the effect could vary depending on
the number of years since the adoption of the practice. Specifically, we use dummy
variables to indicate whether a firm adopts each practice S years ago (S = 1, 2, 3, 4, 5, or
more, then 6) in equation (3).13 The estimation results are shown in Table 8(1) for the
random-effects model and Table 8(2) for the fixed-effects model. The average effects
listed at the bottom of the tables indicate the three-year or all-year averages of the12

We confirmed that the balancing property was satisfied. In addition, we obtained similar
results when we simply estimated equation (4) by ordinary least squares.
13
The year of the introduction of each WLB practice was surveyed only for the firms that had
adopted the practice at the time of the survey. Thus, cases in which the practice was introduced
but removed until the survey year were excluded.
14

coefficients for the lags of WLB practice dummies. These figures indicate medium- or
long-term effects of WLB practices on TFP.
Table 8(1) shows several significantly positive coefficients for the
random-effects model. For example, WLB practices 1 (child-care leave above legal
minimum), 2 (family-care leave above legal minimum), 3 (short-term working system),and 4 (flextime system) have positive coefficients for the five-year and/or more thansix-year lags. Likewise, WLB practices 6 (establishment of a department to promote
WLB practice) and 7 (organizational efforts to reduce overtime) have a one-year or
two-year lag. Therefore, the average effects for WLB practices 1, 2, 6, and 7 are
significantly positive, which indicates a positive correlation between these WLBpractices and firm TFP in the medium and long run, as shown in Table 2.
After controlling for the time-invariant firm-fixed effects in Table 8(2), we findthat most of the coefficients for the WLB practice dummies are insignificant and theaverage effects of WLB practices for the three-year and all-year results are insignificant.
These results imply that each WLB practice has no causal relationship with firm TFP.
However, it is worth noting that we find significant and positive coefficients for longer
lags of the WLB practice adoption dummies such as WLB practices 2, 6, and 7. Fromthese results, we interpret that it would take some time for the WLB practice to have aneffect on firm productivity, which seems consistent with the observations in Figure 1.
The effects of each WLB practice differ depending on firm characteristics, as
shown in Table 2. For example, Table 7(3) summarizes the estimation results with only
labor-hoarding firms used as the sample. Although we see significantly negative
coefficients in several cases, significantly positive effects of WLB practices are also
found, especially for WLB practice 6 (establishment of a department to promote WLBpractice) and 7 (organizational efforts to reduce overtime). Moreover, the effects ofthese WLB practices in the medium and long run are sizable: a 19–23% increase in the
TFP for three years after the adoption of the WLB practice and a 16–19% increase forall periods.14

5. Concluding remarks
This paper examines how firm practices contributing to worker attainment of WLB
affect TFP using panel data of Japanese firms from the 1990s. We observe a positive
correlation between firm WLB practices and TFP. However, it is likely that this positive
correlation results from the reverse causality in which firms with higher productivity
14

Results similar to those in Table 2 are obtained when we focus on other firm characteristics
such as firm size and industry.
15

tend to implement WLB practices because these firms can afford to introduce WLBpractices and/or they face social pressure to fulfill CSR. In fact, when unobserved firm
heterogeneity is controlled, we find no causal relationship in which WLB practices
increase a firm’s TFP. Therefore, the WLB practices by themselves that were examinedin this paper do not increase a firm’s productivity.
We also find significantly positive effects for firms with the following
characteristics: large size, manufacturing focus, those that exhibit labor hoarding during
recessions, and those using electronic commerce. Among these characteristics, weemphasize labor hoarding because labor-hoarding firms are likely to incur large fixed
employment costs. Thus, we infer that firms investing in firm-specific human skills or
having large hiring/firing costs could benefit from WLB practices through decreases inturnover or increases in recruiting effectiveness. Therefore, we conclude that firms
exhibiting characteristics, such as those having large fixed employment costs, which
contribute to WLB practices, have positive effects on productivity.
This paper’s results are robust against time-varying factors that could bringabout endogeneity in adopting WLB practices, the choice of firm productivity measure,and estimation strategy. As for the type of WLB practices, we determine that theestablishment of a department to promote WLB practices and organizational efforts to
reduce overtime as well as child- and family-care leave above the legal minimum tend
to improve firm productivity. Furthermore, we find that it took some time for WLB
practices to have a positive effect.
Our conclusion that firms with large fixed costs of employment could benefit
from WLB practices is consistent with the findings in previous studies, especially thoseof Yanadori and Kato (2009). Using cross-sectional data of Japanese firms, Yanadori
and Kato (2009) find that work–family practices could decrease female turnover rates.
Furthermore, it is interesting to compare the results of this study with those of Bloom etal. (2009). Based on the cross-sectional data of firms in four counties, Bloom et al.
(2009) show that it is not WLB but management practices that affect firm productivity;
hence, the effects of WLB practices on firm productivity disappears once management
practices are controlled. This suggests that the firm-fixed effects that we control for in
the estimation should include firm management practices that are emphasized by Bloom
et al. (2009). That is, the firms implementing more WLB practices are likely to havebetter management practices, and therefore the estimations that control for firm-fixed
effects or management practices may have suggested no causal effects of WLB practices
on firm productivity. However, even when controlling for firm-fixed effects, we confirm
the existence of causal effects for firms with certain characteristics, such as those having
large fixed employment costs.
One of the implications from this finding is that firms with such characteristics
can benefit from the implementation of WLB practices. For example, among firms that
hoard labor, WLB practices that retain personnel, such as dedicated WLB departments
16

or reduced overtime policies, preserve the firm’s ability to generate future productivity
growth. However, it is surprising that labor-hoarding firms do not necessarily exhibit
higher adoption of WLB practices. For example, the adoption rate of the practice “anestablishment of department to promote WLB practice” is 14% for labor-hoarding firms
and 11% for others; the adoption rate of the practice “organizational efforts to reduce
overtime” is 31% for labor-hoarding firms and 29% for others. Even thoughlabor-hoarding firms can benefit from these WLB practices, the differences in the
adoption rates are marginal. If this is related to a lack of information on the effect of
WLB practices, as suggested by Bryson et al. (2007) or Bloom et al. (2011), we derive
the argument that the government may be able to promote the implementation of firm
WLB practices by announcing the positive effects on firm productivity to those firms.

17

References
Ackerberg, Daniel, Kevin, Caves, and Garth Frazer (2006) “Structural Identification of
Production functions,” MPRA Paper, 38349.
Batt, Rosemary (2002) “Managing customer services: human resource practices, quit
rates, and sales growth,” Academy of Management Journal, Vol.45, No.3, pp.
587-597.
Baughman, Reagan, Daniela DiNardi, and Douglas Holtz-Eakin (2003) “Productivity
and wage effects of “family-friendly” fringe benefits,” International Journalof Manpower, Vol.24, No.3, pp. 247-259.
Bloom, Nick, Tobias Kretschmer, and John Van Reenan (2009) “Work-life balance,
management practices and productivity,” Freeman, Richard B. and Kathryn L.
Shaw eds. International Differences in the Business Practices and Productivityof Firms, The University of Chicago Press. Chapter 1, pp. 15-54.
Bloom, Nick, Tobias Kretschmer, and John Van Reenan (2011) “Are Family-friendly
Workplace Practices a Valuable Firm Resource?” Strategic Management
Journal, Vol.32, No.4, pp. 343-367.
Bryson, Alex, Rafael Gomez, Tobias Kretschmer, and Paul Willman (2007) “Thediffusion of workplace voice and high-commitment human resource
management practices in Britain, 1984–1998,” Industrial and Corporate
Change, Vol.16, No.3, pp. 395-426.
Dalton, Dan R. and Debra J. Mesch (1990) “The impact of flexible scheduling on
employee attendance and turnover,” Administrative Science Quarterly, Vol.35,
No.2, pp. 370-387.
Freeman, Richard B. and Kathryn L. Shaw eds. (2009) International Differences in theBusiness Practices and Productivity of Firms, The University of Chicago
Press.
Giardinia, Angelo and Rüdiger Kabsta (2008) “Effects of work-family human resource
practices: a longitudinal perspective,” The International Journal of Human
Resource Management, Vol.19, No.11, pp. 2079-2094.
Gray, Matthew and Jacqueline Tudball (2003) “Family-friendly work practices:
differences within and between workplaces,” Journal of Industrial Relations,Vol.45, No.3, pp. 269-291.
Hirano, Keisuke, and Imbens, Guido (2001) “Estimation of Causal Effects using
Propensity Score Weighting: An Application to Data on Right Heart
Catheterization.” Health Services and Outcomes Research Methodology. 2(3-4),
pp. 259-278.
Kawaguchi, Daiji (2007) “A Market Test for Sex Discrimination: Evidence fromJapanese Firm-Level Data,” International Journal of Industrial Organization,18

Vol.25, No.3, pp.441-460.
Konrad, Alison and Robert Mangel (2000) “The impact of work-life programs on firm
productivity,” Strategic Management Journal, Vol.21, pp.1225-1237.
Levinsohn, James and Amil Petrin (2003) “Estimating production functions using inputs
to control for unobservables,” Review of Economic Studies, Vol.70, No.2,
pp.317-342.
Milliken, Frances, Luis Martins, and Hal Morgan (1998) “Explaining organizational
responsiveness to work-family issues: the role of human resource executives
as issue interpreters,” Academy of Management Journal, Vol.41, No.5, pp.
580-592.
Mincer, Jacob and Yoshio Higuchi (1988) “Wage structures and labor turnover in the
United States and Japan,” Journal of the Japanese and International
Economies, Vol.2, No.2, pp. 97-133.
Morikawa, Masayuki (2010) “Labor unions and productivity: an empirical analysis
using Japanese firm-level data,” Labour Economics, Vol.17, No.6, pp.
1030-1103.
Olley, Steven G. and Ariel Pakes (1996) “The dynamics of productivity in thetelecommunications equipment industry,” Econometrica, Vol.64, No.6, pp.
1263-1297.
Perry-Smith, Jil, and Terry Blum (2000) “Work-Family Human Resource Bundles andPerceived Organizational Performance,” Academy of Management Journal,
Vol.43, No.3, pp. 1107-1117.
Petrin, Amil and Levinsohn James (2012) “Measuring aggregate productivity growthusing plant-level data,” forthcoming in Rand Journal of Economics.
Shepard, Edward M. III, Thomas J. Clifton, and Douglas Kruse (1996) “Flexible work
hours and productivity: some evidence from the pharmaceutical industry,”
Industrial Relations, Vol.35, No.1, pp. 123-139.
Yanadori, Yoshio and Takao Kato (2009) “Work and family practices in Japanesefirms: their scope, nature and impact on employee turnover,” The International
Journal of Human Resource Management, Vol.20, No.2, pp. 439-456.
Wooldridge, Jeffrey (2009) “On estimating firm-level production functions using proxyvariables to control for unobservable,” Economic Letters, Vol.104, pp.
112-114.

19

Table 1 Summary statistics

TFP

All sample

Firm size
more than 300
workers

Industry
Manufacturing

0.32(0.17)

0.34(0.18)

0.34(0.16)

0.23(0.42)
2000(6.98)

0.20(0.40)
2001(7.47)(0.36)
2000(5.72)

0.19(0.40)
1999(5.90)

0.17(0.38)
2000(5.81)

0.10(0.30)
2002(5.90)

0.09(0.28)
2002(5.18)

0.09(0.29)
2002(5.73)

0.15(0.36)
1999(7.28)

0.20(0.40)
1997(7.79)

0.18(0.38)
1998(7.53)

0.10(0.30)
1998(8.49)

0.04(0.19)
1994(16.80)WLB practices
Child-care leave above legal minimum
0.18
Adoption dummyYears of the adoption(0.38)
2000(6.99)

Family-care leave above legal minimum
0.15
Adoption dummyYears of the adoption
Short-time working system
Adoption dummyYears of the adoption
Flextime system
Adoption dummyYears of the adoption

Practice to limit work location within local area
0.06
Adoption dummyYears of the adoption(0.24)
1996(13.32)

Establishment of department to promote WLB practice
0.12
0.17
Adoption dummyYears of the adoption(0.33)
2006(2.74)

Organizational efforts to reduce overtime hours
0.30
Adoption dummyYears of the adoption
Number of firms(0.46)
2004(5.96)
1,292(0.37)
2006(2.83)

0.15(0.35)
2006(2.70)

0.30(0.46)
2004(5.65)
527

0.31(0.46)
2004(6.49)
581

Notes: 1. umbers in parentheses are standard deviations.
2. WLB practice adoption dummy is the index variable, which takes the valueof 1 if the firm adopts WLB practices until 2008 and 0 otherwise.

20

Table 2 Main estimation results

WLB practice index(1)RE
0.042**(0.012)

(2)
FE
0.013
(0.017)

Dependent variable = ln (TFP)
(3)
(4)
(5)
FE
FE
FE
-0.015-0.090**-0.022(0.023)(0.020)(0.022)

Cross terms
Large firm dummy(6)FE-0.022(0.020)0.055+(0.030)M anufacturing dummy

0.189**(0.026)

Labor hoarding dummy

0.068*(0.030)IT usage dummy

0.040+(0.021)0.040**(0.004)-81.369**(7.328)3,949

0.018**
0.020**
0.020**
0.020**
0.020**(0.002)(0.002)(0.002)(0.002)(0.002)
Constant-37.426** -41.516** -41.892** -41.299** -41.623**(3.744)(4.024)(4.029)(3.987)(4.025)
Sample size
5,169
5,169
5,169
5,169
5,169
Notes: 1. Dependent variables are log TFPs on value-added basis.
2. Numbers in parentheses are robust standard errors.
3. **, *, and + indicate statistical significance at the 1%, 5%, and 10% levels, respectively.
4. WLB practice index is the sum of the number of adopted WLB practices until the previous
year. The large-firm dummy takes the value of 1 for a firm with more than 300 workers. The
labor-hoarding dummy takes the value of 1 for the firm with relative volatility of regular
employees to output for a decade less than the median. The IT-usage dummy, available only
after 1998, takes the value of 1 if a firm uses electronic commerce.
Trend

21

Table 3 Robustness checks: time-varying controls

WLB practice index(1)RE
0.042**(0.012)

(2)
FE
0.006
(0.017)

Dependent variable = ln (TFP)
(3)
(4)
(5)
FE
FE
FE
-0.025-0.095**-0.025(0.022)(0.019)(0.021)

Cross terms
Large firm dummy

0.061*(0.029)M anufacturing dummy

0.187**(0.026)

Labor hoarding dummy

0.060*(0.030)IT usage dummyInformation cost ratio (I.C.)(I.C.-mean(I.C.))2
Asset ratio x (I.C.-mean(I.C.)
Fix asset ratio
Trend
Constant
Sample size

(6)FE
-0.024(0.020)3.744+(2.108)-21.646*(8.788)3.886(3.310)-0.333**(0.039)0.019**(0.002)-39.975**(3.760)5,169-3.969(2.468)7.672(11.195)
9.539*(4.205)-0.564**(0.057)0.022**(0.002)-44.191**(4.039)5,169-4.093+(2.472)
7.549(11.355)
9.866*(4.214)-0.567**(0.057)0.022**(0.002)-44.590**(4.041)
5,169-3.483(2.409)4.271(10.565)8.030+(4.281)-0.560**(0.057)0.021**(0.002)-44.071**(4.009)5,169-3.986(2.453)
7.532(11.262)9.316*(4.198)-0.560**(0.057)0.022**(0.002)-44.258**(4.042)5,169

0.041*(0.020)-5.263+(2.695)9.562(9.986)10.431*(4.083)-0.718**(0.099)0.033**(0.004)-66.463**(7.549)3,949

Notes: 1. Dependent variables are log TFPs on a value-added basis.
2. Numbers in parentheses are robust standard errors.
3. **, *, and + indicate statistical significance at the 1%, 5%, and 10% levels, respectively.

22

Table 4 Robustness checks: Labor productivity

WLB practice index(1)RE
0.041**(0.013)

Dependent variable = ln (Labor productivity)
(2)
(3)
(4)
(5)
FE
FE
FE
FE
0.010
-0.016-0.093**-0.033(0.016)(0.020)(0.017)(0.021)

Cross terms
Large firm dummy

0.049+(0.028)

M anufacturing dummy

0.188**(0.025)

Labor hoarding dummy

0.081**(0.028)IT usage dummy
TrendConstant
Sample size

(6)FE
-0.019(0.019)0.027**(0.002)-56.264**(3.778)5,169

0.029**(0.002)-60.267**(4.022)
5,169

0.029**(0.002)-60.600**(4.023)5,169

0.029**(0.002)-60.051**(3.998)5,169

0.029**(0.002)-60.395**(4.022)
5,169

0.036+(0.020)0.045**(0.004)-92.070**(7.362)
3,949

Notes: 1. Dependent variables are log labor productivity (value-added divided by man-hour labor input).
2. Numbers in parentheses are robust standard errors.
3. **, *, and + indicate statistical significance at the 1%, 5%, and 10% levels, respectively.

23

Table 5 Robustness checks: TFP from WLP method

WLB practice index(1)RE
0.053**(0.013)

(2)
FE
0.013
(0.017)

Dependent variable = ln (TFP)
(3)
(4)
(5)
FE
FE
FE
-0.019-0.088**-0.029(0.020)(0.017)(0.021)

Cross terms
Large firm dummy

0.063*(0.028)

M anufacturing dummy

0.185**(0.025)

Labor hoarding dummy

0.081**(0.028)IT usage dummy
TrendConstant
Sample size

(6)FE
-0.019(0.018)0.024**(0.002)-48.814**(3.753)5,169

0.020**(0.002)-41.516**(4.024)5,169

0.027**(0.002)-54.296**(3.973)5,169

0.026**(0.002)-53.741**(3.946)
5,169

0.027**(0.002)-54.043**(3.974)5,169

0.035+(0.020)0.044**(0.004)-89.526**(7.250)3,949

Notes: 1. Dependent variables are log TFPs on value-added basis derived from WLP method.
2. Numbers in parentheses are robust standard errors.
3. **, *, and + indicate statistical significance at the 1%, 5%, and 10% levels, respectively.

24

Table 6 Difference-in-differences estimation with propensity score weighting

WLB practice adoption
dummy x Year dummy

(1)
FE
0.155
(0.119)Cross terms
Large firm dummy

Dependent variable = ln (TFP)
(2)
(3)
(4)
FE
FE
FE

0.166+(0.095)

M anufacturing dummy

0.310**(0.096)

Labor hoarding dummy

0.262*(0.102)IT usage dummy
WLB practice adoption dummyYear dummy
Constant
Sample size

(5)FE

-0.208(0.136)0.151**(0.015)-1.378**(0.021)
2,278-0.125(0.085)0.165**(0.026)-1.386**(0.021)2,278-0.196*(0.094)0.138**(0.020)-1.380**(0.022)2,278-0.212*(0.095)0.149**(0.020)-1.378**(0.020)
2,278

0.134
(0.119)-0.146(0.104)0.171**(0.025)-1.384**(0.022)
2,278

Notes: 1. Dependent variables are log TFP on value-added basis.
2. Numbers in parentheses are robust standard errors.
3. **, *, and + indicate statistical significance at the 1%, 5%, and 10% levels,
respectively.
4. Year dummy takes the value of 1 for the year 2008.
5. Sample consists of the firms in 2004 and 2008. The WLB practice is theestablishment of a department to promote WLB practice.

25

Table 7 Effects of each WLB practice on firm’s TFPWLB practice adoption
dummy
Cross terms with
Large firm dummy
WLB practice adoption
dummy
Cross terms with
M anufacturing dummy
WLB practice adoption
dummy
Cross terms with
Labor hoarding dummy
WLB practice adoption
dummy
Cross terms with
IT usage dummy

Dependent variable = ln (TFP)
(3)
(4)
(5)

(1)

(2)

Child-careleave abovelegal
minimum

Family-careleave abovelegal
minimum

Short-timeworkingsystem-0.056(0.060)0.143+(0.084)-0.002(0.067)0.127(0.112)-0.026(0.056)-0.030(0.094)-0.037(0.079)0.022(0.113)-0.327+(0.193)0.359+(0.200)-0.025(0.095)0.193+(0.117)-0.006(0.038)0.093(0.067)-0.143*(0.058)0.280**(0.082)-0.181*(0.074)0.401**(0.102)-0.161*(0.070)0.249**(0.087)-0.194**(0.073)0.309**(0.108)-0.150(0.091)0.258*(0.120)-0.171+(0.089)0.402**(0.110)-0.172**(0.041)0.360**(0.058)0.004(0.065)0.012(0.085)0.049(0.075)-0.001(0.108)-0.057(0.063)0.037(0.091)

0.013(0.114)-0.066(0.127)-0.080(0.073)0.052(0.150)-0.045(0.068)0.287**(0.108)-0.116**(0.041)0.284**(0.060)-0.062(0.057)0.140*(0.062)-0.165*(0.067)0.219**(0.065)-0.026(0.064)-0.050(0.061)-0.083(0.081)-0.028(0.063)-0.175(0.152)0.109(0.096)-0.041(0.061)0.141+(0.080)0.041(0.040)-0.024(0.045)

Flextime
systemPractice tolimit work
location in
local area

(6)

(7)

Establishment Organizationalof dept. toefforts topromotereduceWLB practice overtime

Notes: 1. Dependent variables are log TFP on value-added basis.
2. Numbers in parentheses are robust standard errors.
3. **, *, and + indicate statistical significance at the 1%, 5%, and 10% levels, respectively.
4. WLB practice adoption dummy takes the value of 1 if a firm adopted the practice until theprevious year and 0 otherwise.

26

Table 8 Effects of WLB practices on firm TFP(1) Random-effects model
(1)

(2)

Child-care
Family-careleave above leave above
legal
legal
minimum
minimum
WLB practice adoption dummies
1 year earlier
0.070−0.007
2 year earlier
3 year earlier
4 year earlier
5 year earlier
more than
6 year earlier
Trend
Constant
Sample size
Average effects
for 3 years
Average effects
for all years(3)
Short-timeworkingsystemWLB practices(4)(5)
Flextime
systemPractice tolimit work
location in
local area

(6)

−0.114−0.0920.028
0.203**(0.084)(0.093)(0.074)(0.120)(0.065)(0.062)0.069
0.065−0.010−0.052−0.0160.138+(0.043)(0.049)(0.063)(0.066)(0.083)(0.083)
0.028
0.023
0.041
0.001
−0.2300.096(0.060)(0.071)(0.070)(0.066)(0.149)(0.100)−0.001
0.061−0.0120.062
0.013−0.075(0.069)(0.083)(0.084)(0.069)(0.075)(0.129)0.117*
0.217**
0.123
0.140*
0.114
0.135(0.047)(0.047)(0.081)(0.068)(0.077)(0.084)0.160**
0.242**
0.078+
0.188**
0.021
0.084(0.035)(0.036)(0.047)(0.037)(0.048)(0.115)0.018**
0.017**
0.020**
0.018**
0.020**
0.019**(0.001)(0.001)(0.001)(0.001)(0.001)(0.001)−37.390** −36.027** −40.914** −37.563** −40.766** −40.204**(2.864)(2.829)(2.827)(2.813)(2.729)(2.843)
4,757
4,775
4,774
4,760
4,870
4,782
0.055
[1.91]
0.074*[6.41]

0.027[0.35]
0.100**[9.15]-0.028[0.41]
0.017[0.25]-0.048[0.80]
0.041[1.28]-0.073[1.25]-0.012[0.07](7)

Establishment Organizationalof dept. toefforts topromotereduceWLB practice overtime

0.146**[7.51]
0.097+[3.59]

0.007(0.039)0.090+(0.048)0.067(0.056)−0.044(0.049)0.054(0.059)0.005(0.037)0.019**(0.002)−38.853**(3.009)4,358
0.055+[3.14]
0.030[1.46]

Notes: 1. Dependent variables are log TFPs on value-added basis.
2. Numbers in parentheses are robust standard errors. Numbers in block parentheses are
F-statistics for the sum of the effects on TFP.
3. **, *, and + indicate statistical significance at the 1%, 5%, and 10% levels, respectively.

27

(2) Fixed-effects model
(1)

(2)

Child-care
Family-careleave above leave above
legal
legal
minimum
minimum
WLB practice adoption dummies
1 year earlier
0.016−0.0482 year earlier
3 year earlier
4 year earlier
5 year earlier
more than
6 year earlier
Trend
Constant
Sample size
Average effects
for 3 years
Average effects
for all years(3)
Short-timeworkingsystemWLB practices(4)(5)
Flextime
systemPractice tolimit work
location in
local area

(6)

−0.156*−0.170−0.0330.164**(0.085)(0.102)(0.074)(0.128)(0.072)(0.055)0.034
0.039−0.034−0.0920.017
0.046(0.050)(0.058)(0.066)(0.079)(0.099)(0.093)0.001−0.0070.035−0.034−0.2260.081(0.065)(0.077)(0.056)(0.081)(0.182)(0.106)−0.0500.026−0.0560.012−0.028−0.043(0.074)(0.091)(0.110)(0.073)(0.085)(0.137)0.034
0.167**
0.075
0.055
0.055
0.193+(0.062)(0.064)(0.086)(0.095)(0.074)(0.117)0.068
0.189*
0.004
0.091−0.0600.097(0.068)(0.082)(0.074)(0.077)(0.078)(0.145)0.019**
0.018**
0.020**
0.019**
0.020**
0.020**(0.002)(0.002)(0.002)(0.002)(0.002)(0.002)−39.177** −37.254** −42.080** −39.663** −41.556** −41.214**(3.959)(3.842)(3.899)(3.842)(3.792)(3.826)
4,757
4,775
4,774
4,760
4,870
4,782
0.017
[0.12]
0.017[0.14]-0.005[0.01]
0.061[1.24]-0.052[1.14]-0.022[0.21]-0.099[2.16]-0.023[0.16]-0.081[0.74]-0.046[0.43](7)

Establishment Organizationalof dept. toefforts topromotereduceWLB practice overtime

0.097[2.16]
0.090[1.39]

0.017(0.036)
0.092+(0.051)
0.073(0.060)−0.020(0.051)
0.093+(0.056)0.050(0.062)0.018**(0.002)−38.363**(4.092)4,358
0.060[2.27]
0.051[2.05]

Notes: 1. Dependent variables are log TFP on value-added basis.
2. Numbers in parentheses are robust standard errors. Numbers in block parentheses are
F-statistics for the sum of the effects on TFP.
3. **, *, and + indicate statistical significance at the 1%, 5%, and 10% levels, respectively.

28

(3) Labor-hoarding firms
(1)

(2)

Child-care
Family-careleave above leave above
legal
legal
minimum
minimum
WLB practice adoption dummies
1 year earlier
0.074−0.027
2 year earlier
3 year earlier
4 year earlier
5 year earlier
more than
6 year earlier
Sample size
Average effects
for 3 years
Average effects
for all years(3)
Short-timeworkingsystemWLB practices(4)(5)
Flextime
systemPractice tolimit work
location in
local area

(6)

(7)

Establishment Organizationalof dept. toefforts topromotereduceWLB practice overtime(0.078)−0.029(0.071)−0.143(0.096)−0.203*(0.097)0.002(0.082)0.089(0.091)2,365(0.103)−0.067(0.084)−0.209+(0.121)−0.115(0.113)0.105(0.089)0.222+(0.121)2,359−0.162(0.108)−0.115(0.090)−0.020(0.087)−0.082(0.108)0.102(0.113)−0.034(0.108)2,369−0.211(0.137)−0.156(0.102)−0.184*(0.091)−0.083(0.090)−0.100(0.103)0.033(0.084)
2,394

0.035
(0.121)−0.337(0.206)−0.282(0.231)−0.044(0.199)0.173(0.133)−0.047(0.138)2,475

0.210*(0.085)0.326**(0.121)
0.151(0.178)−0.081(0.190)0.413**(0.143)0.127(0.144)
2,399

0.067
(0.047)0.254**(0.067)0.241**(0.086)0.035(0.082)0.193*(0.075)0.158+(0.084)2,184-0.033[0.27]-0.035[0.35]-0.101[1.63]-0.015[0.04]-0.099[1.96]-0.052[0.60]-0.183*[5.61]-0.117+[3.67]-0.195[1.59]-0.084[0.49]

0.229*[4.71]
0.191*[3.88]

0.187**[11.50]0.158**[10.02]

Notes: 1. Dependent variables are log TFP on value-added basis.
2. Numbers in parentheses are robust standard errors. Numbers in block parentheses are
F-statistics for the sum of the effects on TFP.
3. **, *, and + indicate statistical significance at the 1%, 5%, and 10% levels, respectively.
4. Trend and constant terms are included.

29

Figure 1 Work–life balance (WLB) practices and total factor productivity (TFP)(1) Child-care leave above legal minimum(2) Family-care leave above legal minimum

30(3) Short-term working system(4) Flextime system31

(5) Practice to limit work location within local area(6) Establishment of a department for promoting WLB practices

32

(7) Organizational efforts to reduce overtime hours

33