Declining Self-Employment in Japan Revisited: A Short Survey

Although the decline of self-employment has been a fundamental factor in the environment of the Japanese labor market for more than a quarter of a century, economic research on self-employment has remained sparse. This short survey aims to reboot the empirical research. First it summarizes two mainstream literatures: (a) the relation between the business cycle and being self-employed and (b) the entrepreneurship aspects of self-employment. The survey concludes that neither can fully explain the decline of self-employment in Japan. We then point to a relatively new literature on (c) the nonpecuniary rewards of self-employment. While this literature is still developing, it suggests that declining self-employment can be related to a decline in welfare. In particular, comparisons of the welfare implications of self-employment versus non-standard work will be important for deepening our understanding of contemporary Japanese society.