NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Implicit Contracts, the Great Depression, and Institutional Change: A Comparative Analysis of U.S. and Japanese Employment Relations, 1920-1940

Chiaki Moriguchi

NBER Working Paper No. 9559
Issued in March 2003
NBER Program(s):   DAE

This paper employs a game-theoretic framework and a comparative historical analysis to study the impact of the Great Depression on corporate welfarism,' i.e., employers' voluntary provisions of non-wage benefits, greater employment security, and employee representation to their blue-collar workers. By characterizing corporate welfarism as an implicit contract equilibrium, the paper documents parallel institutional developments in the U.S. and Japan towards corporate welfarism during the 1920s and identifies the early 1930s as a bifurcation point at which the two trajectories began to diverge toward two distinctive equilibria. In the U.S., the repudiation of the implicit contracts by most leading firms induced by a deep depression caused a change in the expectations of workers and the public, which, in turn, supported a legal reform and the adoption of explicit employment contracts based on industrial unions and third-party enforcement. Experiencing a less severe depression, most major employers in Japan maintained their implicit contracts, while developing institutional arrangements to mitigate the cost of long-term commitment. In contrast to the U.S., labor laws in Japan developed complementary to private welfare practices, endorsing corporate welfarism based on implicit contracts and internal enforcement mechanisms.

download in pdf format
   (467 K)

email paper

This paper is available as PDF (467 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9559

Published: Moriguchi, Chiaki. "Implicit Contracts, The Great Depression, And Institutional Change: A Comparative Analysis Of U.S. And Japanese Employment Relations, 1920-1940," Journal of Economic History, 2003, v63(3,Sep), 625-665.

Users who downloaded this paper also downloaded these:
Temin w15645 The Great Recession and the Great Depression
Moriguchi w7939 The Evolution of Employment Relations in U.S. and Japanese Manufacturing Firms, 1900-1960: A Comparative Historical and Institutional Analysis
Autor, Katz, and Kearney w11986 The Polarization of the U.S. Labor Market
Gordon and Krenn w16380 The End of the Great Depression 1939-41: Policy Contributions and Fiscal Multipliers
Moriguchi and Saez w12558 The Evolution of Income Concentration in Japan, 1886-2002: Evidence from Income Tax Statistics
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us