School, Firm, and Family: Emergence of the Japanese Internal Labor Market

Abstract

Contemporary Japanese firms recruit new graduates and promote from within, providing a rare example of the 'ports of entry' policy. This microanalysis of the steel industry in the 1930-60s shows that the internal labor market had been continuously enhanced after the 1930s, but mid-career recruiting was active, previous experience served as signal of ability, and employees’ fertility decision largely depended on previous experience as well as tenure until the 1960s, while the return on education sharply increased after the 1950s. These facts indicate that extended schooling replaced mid-career experience after the 1970s alongside technology-education complementary development.