The Industrial Organization of the Japanese Bar: Levels and Determinants of Attorney Income

Authors


  • We received generous financial assistance from the East Asian Legal Studies Program and the John M. Olin Center for Law, Economics and Business at the Harvard Law School. We received helpful advice and suggestions from Bruce Aronson, Tom Ginsburg, Glen Hoetker, Curtis Milhaupt, Jeffrey Rachlinski, Mark West, David Wilkens, an anonymous referee, and participants in presentations at Columbia University, Creighton University, Harvard University, Indiana University, the University of Illinois, New York University, Princeton University, the University of Tokyo, Wesleyan University, the American Law & Economics Association, and the Japanese Law & Economics Association.

J. Mark Ramseyer, Harvard Law School, Cambridge, MA 02138; email: ramseyer@law.harvard.edu. Nakazato is Professor of Law (Taxation and Law and Economics), University of Tokyo; Ramseyer is Mitsubishi Professor of Japanese Legal Studies, Harvard Law School; Rasmusen is Dan R. and Catherine M. Dalton Professor, Kelley School of Business, Indiana University.

Abstract

Using micro-level tax data on attorney incomes in 2004 (when the law was changed to make it confidential), we analyze the industrial organization of the Japanese bar. These data suggest two sources of high income: an idiosyncratic return to talent in Tokyo and a compensating differential for the lack of amenities in the provinces. The most able would-be lawyers (those with the highest opportunity costs) pass the bar-exam equivalent on one of their first tries or abandon the effort and pursue careers outside of law. If they pass, they opt for careers in Tokyo that involve complex litigation and business transactions. This work places a premium on their talent, and from it they earn appropriately high incomes. The less talented face lower opportunity costs and opt to spend many years studying for the exam. If they do eventually pass, they apparently choose between a relatively low-income career in Tokyo and a provincial career paying a compensating differential.

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