Global COE Hi-Stat Discussion Paper Series 297

Research Unit for Statisticaland Empirical Analysis in Social Sciences (Hi-Stat)

Educational Credentialism and Elite Formation in Japan:
A Long-term Perspective

Hi-Stat Discussion Paper

Daiji Kawaguchi
Hiroshi Ono

April 2013

Hi-Stat
Institute of Economic Research
Hitotsubashi University
2-1 Naka, Kunitatchi Tokyo, 186-8601 Japan
http://gcoe.ier.hit-u.ac.jp

Educational Credentialism and Elite Formation in Japan:
A Long-term Perspective

By
Daiji Kawaguchi *Hiroshi Ono **ABSTRACTIn spite of the significant restructuring of the university system in the postwar period, national universities continue
to occupy the top end of the prestige hierarchy of universities in Japan. In this paper, we examine long-term trends
in the educational credentials of Japanese corporate executives. We use high-quality data from the directory ofcorporate executives to assess whether the mechanisms of elite production has changed over time.
We find that the fraction of corporate executives graduating from private universities increased significantly, in
accordance with the massive expansion of private universities in the postwar period. At the same time, our cohortbased analysis finds that private university graduates are being recruited into executive positions at a pace thatexceeds its natural growth rate. Our findings weaken the view that certain prestigious universities are stable
institutions to reproduce the nation’s elites. The improved access to university education results in greater
educational diversity and heterogeneity among the nation’s elites.

* Address: Department of Economics, Hitotsubashi University, Kunitachi, Tokyo 186-8601, Japan. Email:kawaguch@econ.hit-u.ac.jp** Address: Department of Sociology, Texas A&M University, College Station, TX 77843-4351, USA. Email:hono@tamu.edu
Ono gratefully acknowledges support from the Spencer Foundation and Tokyo Center for Economic Research.
Kawaguchi gratefully acknowledges support from Hitotsubashi University Global COE Hi-Stat. Naoki Okada andHiroshi Sato provided excellent research assistance.

Introduction
The evolution of Japanese university education dates back to the Meiji period (1868 to1912), when most of the Imperial Universities were founded. Imperial Universities played acrucial role in the Meiji Restoration as training grounds for the nation’s elites, and as recruiting
pools for the central government ministries (Nagai 1971). Thus began the heritage in which thenation’s best and brightest were funneled from one elite institution to the other – from theImperial Universities to the government ministries.
In the postwar period, authorities of the American Occupation imposed measures to breakup the channeling of elites and the prestige hierarchy that characterized the university system(James and Benjamin 1988; Ogura and Iwai 1991). As a result, Imperial Universities wererenamed national universities. The educational curriculum was revamped to cater to the generalpublic.
To further increase educational opportunities for the general population, the Ministry of
Education granted charters facilitating the launch of private universities. These supply-side
reforms, coupled with the growing demand for higher education in the postwar period, led to a
massive expansion of the university system, of which a majority of the new institutions wereprivate.
The current study examines long-term trends in “educational credentialism” and elite
formation in postwar Japan. How successful were the postwar efforts in dismantling the prestige
differentiation among Japanese universities? Did the improved access to university education
result in greater educational diversity and heterogeneity among the nation’s elites? Or are elites
still recruited from a select group of prestigious universities?

While previous studies underscore the importance of university prestige in getting aheadin Japan, what is critically lacking is evidence on a long-term dimension, i.e. how the
relationship between educational credentials and elite formation has changed over time. Indeed,
the dearth of literature offering systematic examination of how credentialist processes evolve is a
general weakness in stratification research (Bills and Brown 2011). This is a pertinent question
for stratification scholars when we consider the expansion of the university system in postwar
Japan. The supply-side reforms were intended to improve the educational opportunities ofJapanese citizens. The reforms did not take place overnight but were implemented over a periodof 50 years. This paper attempts to assess the outcome of the reforms through an investigation of
the dynamic interplay between educational credentials and elite formation from a historicalperspective.
Examining the long-term effect of the expansion of university education on thecomposition of corporate executives uncovers the mechanism between educational credential andelite formation. If university education is merely an institution to establish credibility for thenation’s elites, the expansion of university education should not alter the composition of theeducational credentials of corporate executives; the executives should continue to be dominatedby elite university graduates because non-elite university graduates do not participate in thecompetition. On the other hand, if graduating from a university in general endows workers withskills required to compete in the race for executives, the expansion of university education
should make the composition of educational credentials more heterogeneous.
This paper examines changes in the composition of educational credentials among
executives in Japan’s publicly traded companies. We show that this composition becomes moreheterogeneous as university education expands. When the fraction of graduates from private2

universities increase by 10 percentage points, the fraction of private university graduates among
company executives increases by 12 percentage points. The increased heterogeneity due to the
expansion of university education weakens the view that university education is merely acredential in the path to elite membership.

Background
Japan is a model case to test theories of education and stratification. Key tounderstanding this association is the concept of “educational credentialism.” Broadly defined,
credentialism is the “extent to which societies allocate individuals to slots in the occupational
hierarchy on the basis of educational qualifications that the candidates present at the point of hire”(Bills and Brown 2011). While the quantity of education is the initial criteria for differentiation,
the quality or prestige dimension is equally important as the means to differentiate university
graduates.
Indeed, what sets Japan apart from the experiences of other countries is the extent towhich individuals’ socioeconomic success is determined by the prestige of the universities fromwhich they graduate. As exemplified by the expression “examination hell,” students and theirparents invest enormous time, money and resources to gain entry into the nation’s top
universities (Ono 2007). As Bowman (1981) and others have noted, “examination hell” hascontinued unabated even as the university system has expanded. Students still compete for the
top universities out of firm conviction that these are strongly linked to success. Bowman
explains: “In Japan competition for entry to preferred institutions has reached a frenzy probably
matched in no other part of the world.” (p.15)

3

Examination hell and the obsessive pursuit of university prestige can only persist in thepresence of a prestige hierarchy of universities that is widely accepted. Further, it presupposesthat graduation from the prestigious universities brings enormous benefits. We describe below,
the evolution of the university hierarchy, and the payoffs associated with university prestige inJapan.

Expansion of the university system in postwar JapanThe University of Tokyo is the genesis of the Japanese university system. It was foundedin 1877 as the nation’s first Imperial University, with the primary aim of training elites for thecentral government. The University of Tokyo was the only university in existence until thegovernment established the second Imperial University – Kyoto University – in 1897. During
the years leading up to the Second World War, the government established five additional
Imperial Universities within Japan – Tohoku, Kyushu, Hokkaido, Osaka and Nagoya – which
represented different regions of Japan.
The recruitment of elites from Imperial Universities into the government ministries
became an institutionalized practice during the prewar period. Graduates of Imperial
Universities received preferential treatment from the ministries; e.g. these graduates were exempt
from taking examinations that are required for graduates from all other universities (Brinton andKariya 1998). Indeed the Imperial Universities became to be widely perceived as an institution
to train the nation’s elites.
The rapid expansion of the Japanese economy in the postwar period triggered enormous
demand for university education. The Japanese government responded by expanding the numberof universities in order to improve access to the general public and to increase the overall supply

4

of university graduates (Ono 2008). This move also reflected in part efforts by the American
Occupation who sought to reduce the concentration of power and prestige among the Imperial
Universities (James and Benjamin 1988). The Imperial Universities were henceforth renamed
national universities, and the preferential treatment between employers and selected universities
were significantly dismantled.
The postwar expansion of the university system was achieved mainly by increasing thenumber of private universities. Between 1949 and 2012, the number of private universities inJapan increased over six-fold, from 92 to 605. The number of national and public universities
expanded as well, but at a more modest pace, from 86 to 178 over the same period.

Benefits of the credentialist society
While the overall supply of university graduates increased as a result of the postwar
expansion, the extent to which it reduced the prestige hierarchy of universities remains unclear.
Previous empirical studies have consistently confirmed that graduates of higher ranking
universities are more likely to succeed in the Japanese labor market with respect to careeradvancement (Ishida, Spilerman and Su 1997), elite formation (Kawaguchi and Ma 2008; Ono2008), income (Ono 2004; 2007), and occupational prestige (Ono 2008). Scholars havedocumented how graduating from a highly selective university improves the probability ofentering large prestigious firms (Abe 1997; Higuchi 1994).
The prestige differentiation between national and private universities also remains salient.
National university graduates have higher rates of return to their university education, and are
more likely to be employed in higher prestige occupations than are private university graduates(Ono 2008).

5

Publications from the popular media persistently confirm that the nation’s top universities
dominate the top positions in business, government, and politics (Ohashi 1995; Kawaguchi and
Ma 2008). Citing the Nihon Keizai newspaper survey, Ishida (1993) reports that graduates of the
top five universities accounted for 51 percent of all presidents of the most competitive andprofitable private firms in Japan. This is a remarkable statistic considering that there are now
close to 800 universities in Japan. Undoubtedly, the bias towards higher prestige universities
among corporate elites can be observed in other countries, but the comparable statistics are
significantly lower, e.g. alumni from the Ivy League schools represented 17 percent of corporate
executives in the U.S. (Useem and Karabel 1986).

Conceptual Framework
Educational credentialism and elite formation
There are several ways to explain the link between university prestige and elite formation.
Although the theoretical models differ in their assumptions, they are consistent in predicting that
more education, or more educational credentials, is associated with greater labor market rewards.
Human capital and screening theories present two alternative explanations of how
education may be related to socioeconomic achievement and elite formation. Under the humancapital framework, education is an investment which subsequently increases labor market
productivity (Becker 1993); elites are selected according to their abilities. If individuals invest
resources to get into a university of higher quality, then they will be rewarded with greater
payoffs.
The screening model of education does not contradict the human capital model, but is anextension to it (Weiss 1995). Both models predict that higher educational attainment is related to6higher benefits, but they differ in their assumptions. Under the screening hypothesis, higher
educational achievement is not necessarily related to higher productivity. Employers do not havesufficient information about the applicants’ productivity, so employers use university prestige as“signals” to sort workers into jobs.
Cultural capital theory suggests that the accumulation of cultural capital in the form ofeducational credentials or academic qualifications determines entry into institutions of power andprestige, and ensures that the status quo is perpetuated and maintained among a handful of elites.
The role of elite educational institutions, then, is to preserve tradition and existing hierarchies(Bourdieu 1998); educational requirements (or credentials) are “used by organizational elites tomaintain cultural hegemony over their own ranks” (Collins 1974, p.421). The preservation ofhierarchy and hegemony among a handful of elites is observed in Japan by the predominance of
the alumni of Tokyo University – undoubtedly the highest ranking national university – inpositions of power and influence, in politics, government and business. Taira and Wada (1987)
explain that Japan Inc. is essentially governed by the exclusive institutional linkages between
Tokyo University, government and business organizations, and explain that “personal networks
and contacts of public officials and private business leaders render the formal structural
distinction of government and business almost meaningless in Japan” (p.264). Thus, thequestion of “Who governs Japan?” cannot be effectively answered without considering the roleof Tokyo University and their alumni who occupy the most influential positions in Japan.
Rohlen (1983) echoes this view, and provides several examples of how Tokyo University
graduates preserve their status quo. The faculty of Tokyo University is made up almost entirelyby their own graduates. In the Ministry of Education which was assigned the task of dismantling7the elite university influence over examinations and jobs, the majority of the top positions werefilled by Tokyo University graduates in the mid-1970s.
Social capital theory complements the cultural capital thesis by suggesting that elite
formation is achieved through the various network ties and social resources that are embedded
between individuals and organizations. Employers may recruit from a selected group of
universities, rather than engage in open market recruitment. Empirical studies of Japanese
university graduates have found that institutional ties between elite universities and prestigious
firms facilitate better employment opportunities for the alumni (Brinton and Kariya 1998; Lee
and Brinton 1996; Rebick 2000). Alumni networks (or old-boys networks) may also improve theprospects for upward mobility at later career stages, through their contacts within theorganization, and/or across organizations (Abe 2002).

Education and stratification
The Ministry of Education expanded the number of universities in Japan in order toimprove educational opportunities for the general population. Overall, access into universities
may have improved as a result. But what is not well known is if the broader university accessalleviated key economic and social inequalities in the long-run. In the study of elite formation,
uncovering a long-term persistent trend where elites continue to be selected from the same
universities would indicate that the mechanisms of elite reproduction have not changed over time.
It would also indicate that policies targeted at improving educational opportunities have not been
as effective as they might appear, at least not with respect to the formation and cultivation of thecountry’s elites.

8We examine the null hypothesis that elites continue to be represented by the nation’s top
universities, in spite of the great expansion of the university system. The “elites” here refer to
executives of Japanese corporations. The null hypothesis condition will be rejected if we canconfirm the declining role of educational credentials in elite selection.

Data and Methods
Our empirical analysis is based on several data sources. For our primary analysis, we use
microdata from Toyo Keizai Directory of Executives, for the years 1990 to 2011. For eachsurvey year, data were collected from executives of publicly listed companies in Japan. The data
include a wide range of personal information including birth year, name of the educational
institution last attended, department or field of study, and year of graduation. The total sample
size is 889,126 observations.
The second dataset of executives was compiled from Diamond Directory of Company
Members, for the years 1977 to 2011. We were unable to obtain the microdata for this directory.
We constructed the dataset by manually entering the data from the published hard copy version
into electronic data format. The directory includes data collected from managers and executives
among the publicly listed companies in Japan. For the purpose of our empirical analysis, we will
use the data for executives, and exclude those for managers. For each survey year, the directory
provided a tabulation of executives broken down by the universities that they graduated from.
The benefit of the Diamond data is that it covers a longer time span. However, because it isaggregated cell data, we are unable to conduct empirical analysis in multivariate form. We will
use the Diamond data as a secondary data source to supplement our analysis using the Toyo
Keizai data.

9

We collected a measure of university selectivity from the 1986 publication Keisetsu Jidai
published by Obunsha. This is a standardized score (hensachi) that estimates the difficulty ofgaining entry into the universities based on the results of the entrance examinations. Higherscores indicate higher selectivity. Lower scores indicate the opposite. For every respondent, wematched the selectivity score for the university that s/he graduated from. Ideally, we want tomatch the selectivity score that is specific to the year that the respondent graduated in. However,past studies have established that selectivity remains relatively stable over time (Ishida,
Spilerman and Su 1997), and we assume this in our analysis.
And finally, we collected historical data on the number of university graduates, broken
down by national versus private universities, to control for the historical expansion of theuniversity system. The data are taken from the School Basic Survey (Gakko Kihon Chosa),
available online from the Ministry of Education, Culture, Sports, Science and Technology(MEXT). The data coverage starts from the year 1948.

Analysis and Results
We begin by examining the distribution of the university selectivity scores between
national and private universities based on the data collected from the 1986 Obunsha publication(see Figure 1). We note here that national universities include public universities in our analysis
unless otherwise noted.
The distribution clearly shows that the legacy of national universities persists even today.
National universities continue to outperform the private universities by occupying the higher endof the distribution. The mean selectivity score is 58.5 in national universities, compared to 49.5

10

in private universities. The distribution is also wider in private universities compared to national
universities.
Figure 1 about here
Figure 2 shows trends in the proportion of private university graduates. The data trend“private average” shows the proportion of private university graduates among all university
graduates, using the data collected from the MEXT database. From our data, we estimated thatthe average year of the executives is 60, and the average age of graduation from university is 22,
suggesting that the average executive has an employment history of 38 years since graduation.
We subtract 38 from the survey year and use the average share of private university graduates forthat year. For example, in the survey year 2000, we use the average for the year 1962.

Figure 2 about here

Both data – Diamond and Toyo Keizai – show a steady increase in the ratio of private
university graduates among executives. The Toyo Keizai data show a modestly higher fraction
than the Diamond data. More conspicuously, both data show a considerable gap when comparedto the overall average. This gap has not narrowed over time. In other words, the distribution ofnational versus private university graduates among executives does not reflect its true
distribution among the population of university graduates. Executives are consistently underrepresented from private universities, and over-represented from national universities.
We next focus on the top universities that have dominated the school rankings among
executives. The six universities listed here are those with the highest share of executives. Tokyoand Kyoto are the two top national universities. Waseda, Keio, Chuo and Nihon are the private

11universities. The top panel shows the plots from the Diamond data, and the bottom panel shows
the corresponding plots from the Toyo Keizai data. Both graphs show nearly identical trends andnumbers, and we highlight these below.
Figure 3 about here
We again observe the declining share of national university graduates relative to theirprivate university counterparts. The most dramatic change is the declining share of graduatesfrom the University of Tokyo, from 28 percent in 1976 to 8 percent in 2010. We observe asimilar declining trend, albeit less dramatic, among Kyoto University graduates, from 14 percent
to 5 percent during the same years. The share of executives from the private universities
remained relatively stable during this period, with the possible exception of Chuo University
whose share expanded from 3 to 4 percent between 1976 and 2010.
In Figure 4, we estimated the share of executives from the top six universities by survey
year. The data again are nearly identical for the two data sources (except for the time lag), with aconspicuous downward trendline. In 1976, graduates of the top six universities dominated 69
percent of all executives. In 2010, this proportion was down to 37 percent.
Figure 4 about here
Figure 4 also includes a second data plot which shows the average university selectivity
scores. For any given year, each point represents the average university selectivity score of all
universities that the executives graduated from (in the Toyo Keizai data). This trendline isvirtually flat. Overall, the average selectivity score declined from 64.3 to 62.1 during 1991 and2010.
We now take advantage of the Toyo Keizai microdata and reexamine the data by
graduating cohort rather than by survey year. By controlling for the graduating year cohort, we12are able to better match the composition of the private university graduates among executives to
its true composition in the aggregate as provided by the MEXT data. For this analysis, wetruncate the data starting from the 1950 to the 1980 graduating cohort, because the number of
executives who graduated before 1950 and after 1980 is relatively small.
Figure 3 indicates the fraction of company executives who graduated from private universities
alongside the overall average for corresponding years collected from the MEXT database. The
share of executives graduating from private universities has steadily increased from 46% amongthe 1950 graduating cohort to 72% among the 1980 graduating cohort.

The increase of

executives graduating from private universities itself is not surprising because the fraction ofprivate university graduates in the overall population of university graduates increased from 61%
among the 1950 graduating cohort to 75% among the 1980 graduating cohort (MEXT data). The
increasing share of executives from private universities may therefore be a natural consequencewhich resulted from the increasing overall share of private university graduates. However, thegrowth of the share of private university graduates among all executives is faster than the natural
growth of private university students among all university students as the two graphs in Figure 6
indicate.
We ran a simple regression to quantify the overall trend that the share of private
university graduates among executives ( Pexecutive ) outpaces its counterpart in the overall
population of university students ( Pgraduates ). We apply weighted least squares using the numberof executives of each cohort as the weight. The regression result is:2 executive  0.33  1.26 P
Pgraduates , N  31, R  0.86 .
(0.07) (0.10)

13Standard errors are reported in the parenthesis below the estimated coefficients. The R 2 implies
that the increase of private university graduates explains 86% of the increase of corporate
executives who graduated from private universities. The estimated coefficient on the fraction ofprivate university students, Pgraduates , is 1.26; a ten-percentage-point increase in the share ofprivate university students increases the share of private university graduates among executives
by 12.6 percentage points. The coefficient is statistically different from 1 and clearly indicatesthat the growth of private university graduates among executives outpaced the natural increase ofprivate university students among all university students.
As we have already seen in Figure 2, the fraction of company executives who graduatedfrom private universities is below the fraction of private university graduates among all
university graduates: private university graduates are under-represented among company
executives. The cohort based analysis in Figure 6 reconfirms the under-representation of private
university graduates among executives. At the same time, we find that private university
graduates are being recruited into executive positions at a pace that exceeds its natural growthrate. We thus observe that the gap between the two have converged over time.
Figure 7 displays the fraction of corporate executives who graduated from the six leading

universities. Consistent with the previous finding that the graduates from national universities
have diminished their presence among corporate executives, the fraction of University of Tokyo
graduates decreased from 15% in the 1950 graduating cohort to 5% in 1980 the graduating
cohort. It is worthy to note here the conspicuous dip in the 1973 graduating cohort, presumablycaused by the admission freeze of the University of Tokyo in 1969, as documented in Kawaguchi
and Ma (2008).

14

The fraction of Kyoto University graduates follows a similar declining trend. While theshare of graduates from the two leading national universities, Tokyo and Kyoto, has diminished,graduates from the two leading private universities, Waseda and Keio, have maintained orslightly increased their presence. The fractions of both Keio and Waseda graduates fluctuate
between 5% to 10% between the 1950 and 1980 graduating cohorts. The fractions of Chuo andNihon graduates did not change significantly over the years.

Conclusion

National universities played a prominent role in the production of elites in Japanesesociety. Originally founded as an institution to prepare and train their graduates into careers in
the government ministries, national university graduates occupied leading positions ingovernment, politics and business, and were to a large extent synonymous with elites. National
universities underwent significant transformations in the postwar period. Institutional linkages
between national universities and government ministries were dismantled. The prestige
hierarchy of universities, with national universities positioned above private universities, wasgreatly eroded with the massive expansion of private universities.
Against this backdrop, we examined long-term trends in the educational credentials ofJapanese corporate executives, to assess whether the mechanisms of elite production has changed
over time. In accordance with the post-war expansion of university education, particularly ofprivate university education, the fraction of corporate executives graduating from private
universities increased significantly. However, we also find that private university graduates areunder-represented, and national university graduates are over-represented among the executives.

15

The finding supports, at least in part, the prevailing view that the nation’s elites are more likely
to be recruited from national (and less from private) universities.
At the same time, we find evidence which shows that the dominance of graduates fromthe top universities has dwindled over time. Most remarkably, the share of graduates from the
University of Tokyo declined from 28 percent to 8 percent between 1976 and 2010. Overall, theshare of graduates from the leading six universities declined from 69 percent to 37 percent
during this period.
Finally, our cohort-based analysis finds that private university graduates are being
recruited into executive positions at a pace that exceeds its natural growth rate. We thus observethat the gap between the two – between the share of private university graduates among
executives versus its share among all university graduates – has narrowed among recent cohortsof executives.
Our findings weaken the view that certain prestigious universities are stable institutions
to reproduce the nation’s elites, and that the path to elite membership is limited to their graduates.
Rather, the increased heterogeneity of the educational credentials of corporate executives
suggests that university education improves workers’ skills and allows them to participate in thecompetition for power and prestige. The improved access to university education results ingreater educational diversity and heterogeneity among the nation’s elites.

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Private Universities.15

National Universities
S.D. 5.43

Mean 49.5

S.D. 8.04

0.05

Density.1

Mean 58.5

30

40

50

60

70

30

40

50

60

70

University Selectivity
Source: Obunsha (1986)

Figure 1 Distribution of university selectivity scores – National versus private universities

19

.8
.7
.6
.5
.4
.3

1980

1990

2000

2010

Year
Private average
Executives - Diamond

Executives - Toyo Keizai

Figure 2 Fraction of private university graduates among executives by survey year

20

.3
.2
.1
0

1980

1990

2000

2010

Year
Tokyo
Waseda
Kyoto

Keio
Chuo
Nihon

0

.1

.2

.3

Figure 3 Fraction of executives from selected universities by survey year (Diamond data)

1980

1990

2000

2010

Year
Tokyo
Waseda
Kyoto

Keio
Chuo
Nihon

Figure 4 Fraction of executives from selected universities by survey year (Toyo Keizai data)

21

80
20
40
60
University selectivity

.7
.6
.5
.4

0

.3

1980

1990

2000

2010

Year
Top 6 - Diamond
Selectivity (right scale)Top 6 - Toyo Keizai

Figure 5 Fraction of executives from top 6 universities and average selectivity scores of graduating
universities, by survey year

22

.8
.7
.6
.5
.4
.3
1950

1960

1970

1980

Year of graduation
Private average

Executives average

Figure 6 Fraction of private university graduates among executives by graduating cohort

23

.2
.15
.1
.05
0
1950

1960

1970

1980

Year of graduationTokyo
Waseda
Kyoto

Keio
Chuo
Nihon

Figure 7 Fraction of executives from selected universities by graduating cohort (Toyo Keizai data)24