Social capital in the Japanese youth labor market: Labor market policy, schools, and norms

This paper develops the concept of institutional social capital and discusses its importance in the labor market. Institutional social capital is constituted by the resources inherent in an organization (such as a school) and thereby available to members of that organization. This is contrasted with the social capital available to individuals through their own personal networks. In the labor market context, an example of institutional social capital is the ties that schools have with employers who recruit a proportion of their new employees as they prepare to graduate. The paper examines how these ties and the norms governing the important labor market screening role played by the high school developed in post-WWII Japan. I also discuss an important positive externality – social control over students – generated by schools' institutional social capital. Finally, I examine current challenges to Japanese high schools' institutional social capital.