Japan's Dual Labor Market, Insider–Outsider Dynamics, and DSGE Extensions

This preprint develops a DSGE model for Japan that incorporates dual labor market structures and insider–outsider dynamics. Firms internalize lifetime employment costs, limiting regular employment and reinforcing reliance on non-regular workers. The model is calibrated to recent Japanese data and simulates short- and medium-run outcomes under three fiscal scenarios. Results highlight that fiscal expansion reduces unemployment and raises growth in the short run, but demographic constraints erode medium-run gains and tighten debt sustainability. The paper emphasizes reproducibility by providing Python code for simulations and sensitivity analysis.