Deregulating Overtime Hours Restrictions on Women and its Effects on Female Employment: Evidence from a Natural Experiment in Japan
| DOI | http://doi.org/10.1111/obes.12221 |
| Published date | 01 August 2018 |
| Author | Naomi Kodama,Takao Kato |
| Date | 01 August 2018 |
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©2017 The Department of Economics, University of Oxford and JohnWiley & Sons Ltd.
OXFORD BULLETIN OF ECONOMICSAND STATISTICS, 80, 4 (2018) 0305–9049
doi: 10.1111/obes.12221
Deregulating Overtime Hours Restrictions onWomen
and its Effects on Female Employment: Evidence from
a Natural Experiment in Japan*
Takao Kato†,‡,§,¶,**,††,‡‡ and Naomi Kodama§§,¶¶
†Colgate University, 13 Oak Drive, Hamilton, NY 13346, USA (e-mail: tkato@colgate.edu)
‡IZA-Bonn, Schaumburg-Lippe-Strasse 5-9, 53113 Bonn, Germany
§School of Management and Labor Relations, Rutgers University, 94 Rockafeller Road,
Piscataway, NJ 08854-8054, USA
¶TCER-Tokyo, Sankyo Main Building #703, 1-7-10 Iidabashi, Chiyoda-ku, Tokyo 102-0072,
Japan
**CJEB (Columbia Business School), 2M9 Uris Hall, 3022 Broadway New York, NY
10027, USA
††CCP (Copenhagen Business School and Aarhus University), Porcelænshaven 24, 2nd
floor DK-2000 Frederiksberg, Denmark
‡‡ETLA (Helsinki), Arkadiankatu 23 B FIN-00100 HELSINKI, Finland
§§Graduate school of Economics, Hitotsubashi University, 2-1 Naka Kunitachi, Tokyo
186-8601, Japan (e-mail: kodama.naomi@r.hit-u.ac.jp)
¶¶Research Institute of Economy, Trade and Industry, 11th floor, Annex, Ministry of
Economy, Trade and Industry (METI) 1-3-1, Kasumigaseki Chiyoda-ku, Tokyo, 100-8901,
Japan
Abstract
This paper provides novelevidence on the effect of deregulating overtime hours restrictions
on women by using the 1985Amendments to the Labour Standards Act (LSA) in Japan as
a natural experiment. The original LSA of 1947 prohibited womenfrom working overtime
exceeding two hours a day; six hours a week; and 150 hours a year.The 1985 Amendments
exempted a variety of occupations and industries from such an overtime restriction on
women.Applying a difference-in-difference model to census data, we find causal evidence
pointing to the positive effect of this particular piece of labour market deregulation on
the proportion of female employment. We then carry out a series of sensitivity analyses to
ensure the robustness of our finding. Especially, we conduct a falsification test and an event
study to show that our causal inference is not threatened by the differential pretreatment
trends. Finally, weuse quantile regressions and find that for jobs with more rapidly growing
proportion of female employment, the effect of the exemption from the overtime work
restriction on women is larger.
JEL Classification numbers: J16, J21, J78, J81, J82, J88.
*Wethank Ryo Kambayashi and Hitotsubashi University’sLarge-scale Data Archiving and Processing Section for
aiding our data collection. We are grateful to the participants of the 2014 Japanese EconomicAssociation for their
Overtime hours restrictions on women 805
I. Introduction
This paper provides new evidence on the causal effect on female employment of labour
market deregulation by using the 1985 Amendments to the Labour Standards Act (LSA)
in Japan as a natural experiment. The LSA in Japan was enacted in 1947, and has been
a major piece of legislation to regulate the Japanese labour market. The LSA contains a
controversial set of protective legislations for women. Perhaps most notable is the 150-
hour annual overtime restriction for women – for female workers overtime is restricted
to a maximum of two hours a day; six hours a week; and 150 hours a year (Nakanishi,
1983).1
The 1985 Amendments to the LSA made a variety of industries and occupations (in-
cluding most professional workers as well as manywomen working in non-manufacturing
industries) exempt from the overtime restriction on women. As such, the significant and
large-scale relaxation of the overtimerestriction for women in 1985 represents an important
example of labour market deregulation.
From the firm’s perspective the overtime restriction on women as in the case of the
original LSA of 1947 can limit its ability to adjust female labour input in a flexible manner
when facing volatile fluctuation in output demand. In other words, the original LSA made
otherwise equally qualified women more costly to the firm than their male counterparts,
resulting in stifled female employment. When such restriction on overtime work is lifted,
the firm may start hiring more female workers.
However, from the perspective of labour supply, some women may opt to leave the
labour market, fearing that they may be asked to work overtime beyond what used to be
a maximum allowed by the LSA. As such the direction of the effect on female employ-
ment of this labour market deregulation is ambiguous theoretically and it is an empirical
matter.2
Our paper contributes to the literature on public policy and female employment. First,
there is a rich literature on affirmative action and its effects on labour market outcomes,
such as women’s wages and employment (for a literature review prior to 2000, see Holzer
and Neumark, 2000, and for more recent works, see for instance, Marion, 2011; Kurtulus,
2012; Miller and Segal, 2012; and Niederle, Segal and Vesterlund, 2013). Second, there
is also a literature on the effect of minimum wage law on women (see e.g. Connolly and
Gregory, 2002; Neumark and Wascher,2004; Kawaguchi and Yamada, 2007; Addison and
Ozturk, 2012).
Third, perhaps the most-closely related literature is a small group of studies that inves-
tigate the impact of labour standards legislations on labour market outcomes for women,
such as wages and employment (see, for instance, Zveglich and van der Meulen Rodgers,
2003 for Taiwan, Hunt, 1999 for Germany, and Goldin, 1988 and Landes, 1980 for the
US). All of these studies examined the impact of regulation – the incidence of protective
legislations on women, while we study the impact of deregulation – the relaxation of pro-
helpful discussions, especially IzumiYokoyama.The research was facilitated by Kato’s extended visit to Hitotsubashi
University as visiting professor and Copenhagen Business School as Velux Visiting Professor, and Kato is grateful
for their hospitality.
1TheLabour Standards Act also prohibits women from working in night shift (10 p.m. to 5 a.m. with 11 p.m. to 5 a.m.
if received an authorization from the Ministry of Labour) except for certain occupations.
2Similar arguments are presented by Zveglich and van der Meulen Rodgers (2003).
©2017 The Department of Economics, University of Oxford and JohnWiley & Sons Ltd
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