labor flows into and out of a hypothetical sector into account and shows that if wages are flexible, changes in labor supply and demand outside the sector affect labor market tightness in the sector in the long term. On the other hand, if wages in the sector are rigid, such kind of transmission mechanism is impeded even in the long term. In the empirical analysis, using monthly data of the effective job-offers-to-applicants ratio by prefecture and occupation, the author then estimates a vector autoregression model that combines long-term and short-term constraints to examine the response to a tightening in labor market conditions. The results indicate that in traditional occupations such as sales and clerical occupations, a tightening in the national labor market is transmitted to individual labor markets, but in growth occupations such as welfare, nursing, and home-life support, no such transmission to individual labor markets takes place. These findings suggest that areas that are expected to grow in the future may be characterized by impediments to the efficient reallocation of labor.

Against the background of Japan’s demographics, Chapter 4, titled “The Role of Human Capital Policy to Achieve Sustainable Growth,” highlights the importance of human capital formation in raising per capita productivity in order to achieve sustainable growth, and examines the role of policies in this direction. The authors point out that individuals accumulate human capital throughout their lifetime and that human capital formation in the early stages of life affects human capital accumulation in later stages. Taking this into consideration, it is argued that while inequality in opportunities for human capital accumulation throughout the various stages of individuals’ lifecycle are largely determined by differences in the family environment, the impact of education policy cannot be ignored and can give rise to later income inequality. These considerations highlight the importance of support for human capital formation in early childhood.

Chapters 5 and 6 examine the employment of mothers after childbirth. Chapter 5 investigates whether the provision of nursery schools and Chapter 6 whether the increase in child care leave benefits have led to a rise in the employment rate among women. Chapter 5, titled “The Provision of Nursery Schools and the Employment Rate of Mothers,” considers the impact of changes in nursery school capacity on the employment rate of mothers. In order to eliminate the effects of unobservables such as individuals’ value system and work motivation, the analysis focuses on changes within prefectures, using figures published in the Population Census from 1990 to 2010. The results indicate that, on average, an increase in the provision of nursery school places did not have an effect on mothers’ employment rate. The authors argue that the likely reason is that the increased provision of nursery school places has simply replaced childcare by grandparents in three-generation households. However, with three-generation households having greatly declined today, it is unlikely that the provision of nursery school places will continue to substitute for child-