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Careers and incentives of Japanese “fast-track” bureaucrats

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To understand the incentive system in Japan's employment system, it should be noted that the prospect of an employee's future compensation is usually associated with the rank of his last position in his company or government. The stylized features of the Japanese employment system described in the introduction are probably more applicable to the “fast-track” Japanese bureaucracy. In the final career stage (at higher ranks in a ministry), the marginal increase in pay through promotion is very large (the age (job) – pay profile is extremely steep).

Thus, the marginal return to survival in the cohort and promotion to the next job level is so strong that it provides a huge incentive to bureaucrats throughout their careers. The path-dependent system leads to more natural selection among homogeneous employees in the long term. The level of his effort and therefore the chance of being promoted to a 'good' job therefore increases with the difference in the expected price values ​​between two jobs.

In each period, he determines his level of effort, and hence the probability of being promoted to a "good" job in the next level, by updating his expected reward. In general, a worker with job J (t, s) in period t must have experienced t – s times of “good” promotion in the last t – 1 periods.

Prize structure and incentives

His job tomorrow depends on his job today, which also depends on his past work experience. For example, a worker who reaches J (n, 1) can be considered the deputy minister of the ministry, who should have been promoted to a "good" job in every layer.

The promotion mechanism

Under the assumption of equal price distribution, the effort level is the same at each position to which he is promoted.

The ministry’s maximisation problem

Thus, the ministry first chooses the optimal level of D and then determines the level of V to meet the participation restrictions. We consider a worker's participation constraints at J (n-1, n-1), since their constraints are the most binding. An employee stays on as long as the reward he receives if he stays is higher than the reward he receives if he leaves.

That is, it stays even if its expected payoff (expected reward minus total cost) is negative. Since his costs incurred in previous periods are sunk, it pays to stay whenever his expected reward is greater than his additional future costs so that he can recoup some of his sunk costs. For simplicity, we assume that the external opportunity or utility of reserving a worker is zero.

Thus, the marginal cost of a worker's effort is less than the marginal benefit to the ministry (equal to one) and the level of effort is inefficient. The ministry then chooses the level of V, which meets the above restriction, given the level of D*.

More general path-dependence models

When V2 is greater than V3, early "good" promotion is more important than in the later period, the level of effort and the probability of "good" promotion are higher in period 1 than in period 2. Thus, the result in the first period is much more decisive for to determine his later career, and he makes a significant effort in the earlier period. When V2 is less than V3, "good" promotion in the later period is considered more valuable and a worker exerts less effort in period 1 than period 2. This case can be considered a "consolation match" since later success is more important than previous success.

This means that if a worker succeeds in a later period, his performance in the earlier period is ignored. This means that when a worker fails to advance to a "good" job in the later period, his "good" promotion in the early period has no value. Compared to the standard path dependence model (V2=V3), the level of effort is higher for J (2,1) and lower again for J (1,1).

In summary, if we loosen the assumption of the standard path-dependent model (V2=V3), we can consider three types of models. The 'merit system' model provides a higher incentive to exert effort for a 'loser' in period 2. These results suggest that the ministry could choose a different scheme depending on the relative importance of an employee's effort on which the ministry focuses.

However, when teamwork or cooperation is important among workers in different jobs, the ministry may wish to minimize the difference in effort level among workers, since the existence of a worker with a lesser effort level may demoralize a worker with a high effort level. In such a case, the ministry has an incentive to choose the standard path dependence model with equal premium spread. We thus consider the standard path-dependent model with equal premium spread as a basic scheme for "fast-track".

Summary

The intertemporal reward pattern is thus extremely 'delayed' and this pattern gives an employee a strong incentive to stay within the company until he receives an award and a ministry can support such an incentive by taking into account the participation constraint. However, without pay for performance, an employee has an incentive to work hard in each period for a 'good' promotion, which would increase the expected reward. His effort level and the probability of a “good” promotion are determined by the difference in his expected price between two available jobs in the next period.

These features of this model are consistent with the "fast track" career system of government officials in Japan, as we saw in the introduction.

The applicability of the career path dependent model to the incentive system of

Furthermore, a path-dependent scheme can distinguish between workers of the same quality in the long run. When workers' abilities are relatively homogeneous, but a selection mechanism is also necessary, the path-dependent model may be appropriate. Second, the possibility of getting a profitable job after retirement ("amakudari") gives a bureaucrat a stronger incentive to be promoted to a higher job level in his ministry than workers in large private employers, since the salary level of his second job is usually not less, and sometimes higher, than his last position in his ministry.

This is actually one of the important determinants in the recruiter's choice of a ministry and can be considered as a kind of award in the career path dependent model. The possibility of "amakudar" that a ministry can offer depends on the amount of rents that can be shared with the relevant private sector. For example, a regulatory ministry can create such rents by imposing restrictions on entry into the regulated industry.

When the amount of rents taken by the government is higher, the possibility of “amakudari” is also higher. Thus, raising or at least maintaining the amount of ministerial rents for the future is the fundamental goal of every member of the ministry. In theory, such an exterior could lead to multiple equilibria of the members' strategy, but in reality a cooperative equilibrium is likely to emerge in an infinitely living ministry and among its members.

Each bureaucrat works together with other members to maximize the rents of his ministry and maintain "dynastic control", not only considering the welfare of "the same year".

The opportunity of “amakudari” and different selection systems

Apparently, the probability of "good" promotion, or the effort level, is less than the optimal one of Operation B. On the other hand, a worker cannot update his expected price in period 2, and he has no choice but to not to stay. the ministry. Service B asks a worker to preselect his probabilities of "good" promotion (or effort) in period 1 and period 2.

Let us assume that p3,1, p3,2 are the probability of a “good promotion” in the first and second periods respectively. The chance of 'good' promotion of scheme 3 is equal to that of scheme 2, and greater than that of scheme 1. The Ministry of Finance still has plenty of opportunities for 'amakudari' in the financial sector.

The main jobs are those in the Budget Bureau, in which every candidate for a deputy minister post has to work several times in his career. Since most of the career paths of a "fast track" MoF official are very path dependent, it is relatively easy to project his future career path given his career history. However, even the "losers" in the career competition still have a strong incentive to move up to a higher job level, since the changes in the prizes available to the "losers".

Most of the industries (manufacturing) that MITI oversees are deregulated. MITI has smaller rents shared with the private sector and thus fewer opportunities for “amakudari” than MoF. Thus, the competition for a deputy minister in MITI is likely to be strategically 'ambiguous' to keep incentives very high until the last minute of the final promotion. Thus, a “good” worker who is seen as a candidate for a future high post would have to have experienced a series of “good” jobs called “mainstream.”

In this sense, the selection at the top of a "different type" has recently taken place in some. For example, the candidate who was expected to be selected as Deputy Minister of MOF was not selected in the last promotion exercise under the influence of some scandals prevailing in the financial world. The role of "same year" recruits (competition among a small number of homogeneous participants) could give some relevance to the tournament model, combined with the following rule of cooperation among them.

In this appendix, we consider competition and cooperation between "same-year recruits" in the context of the tournament model. Thus, the price (the opportunities of "amakudari") can be reduced by the sum of their sabotage activities (multiplied by a constant (k> 0)) from the initial level without sabotage activity.

Roberts (1988), “An Economic Approach to Influencing Activities in Organizations”, American Journal of Sociology 94, p. S154-S Career Development and Accumulation of Specific Human Capital", Journal of the Japanese and international economies 6, pp The Japanese Market Economy System : Its Strength and Weakness, LTCB International Library Selection No.

Figure 1    The career path-dependent model
Figure 1   The career path-dependent model

2) Late selection

3) Late selection with the merit system

4) Late selection with the demerit system

2) Ministry B (Scheme 1)

3) Ministry B (Scheme 2)

4) Ministry B (Scheme 3)

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