The Production Structure and Demand for Labor in Postwar Japanese Agriculture, 1952–82

Abstract This paper analyzes the factor relations of postwar Japanese agriculture to identify the factors which explain a significant decline in labor in the agricultural sector. A nonhomothetic and Hicks‐non‐neutral translog cost function is estimated. The results of the decomposition analysis based on the estimates show that biased technical changes and nonhomotheticity together with price‐induced factor substitutions play an important role in easing the transfer of agricultural labor to the nonagricultural sectors. The results also suggest that the biased technical change is consistent with the Hicksian‐induced innovation hypothesis.