Wage and Productivity Differentials in Japan: The Role of Labor Market Mechanisms

Two stylized facts characterized Japan during the so-called Lost Decade (1992-2005): rising wage inequalities and increasing productivity differentials at the firm level. Surprisingly, these features have never been connected in the literature. This paper attempts to fill this gap by proposing an explanation focusing on labor market mechanisms. We first construct an efficiency wage model with two types of firms distinguished by their job security schemes and associated incentive mechanisms. We show that a comparable negative productivity shock at the aggregate level leads to different firm reactions; namely, the model predicts increasing effort from workers in firms employing an efficiency wage mechanism. This leads to increasing productivity and wage differentials and a rise of the share of these firms in the total population of firms. We test this model using Japanese micro data. For the first time, we match the Basic Survey on Wage Structure and the Employment Trend Survey for 2005. The matched worker-firm dataset we obtain allows us to confirm the existence of an efficiency wage mechanism on average. We also divide our sample of firms into two groups using the unknown regime switching regression a la Dickens and Lang (1985), and find that the primary sector, unlike the secondary, is characterized by efficiency wages. We confirm this result with various robustness checks. Finally, we simulate the evolution of the share of the primary sector in the economy and find that it substantially increased between 1981 and 2005 in line with the predictions of our model.heterogeneity of firms, efficiency wages, job security, effort, productivity differentials, wage inequalities

Japanese Political Economy Revisited: Diverse Corporate Change, Institutional Transformation, and Abenomics

This article has been published as the introduction of the special issue in Japan Forum (“Japanese Political Economy Revisited: Abenomics and Institutional Change”) and as an introduction to the book (Japanese Political Economy Revisited: Abenomics and Institutional Change, Routledge)This introductory article to the special issue on “Japanese Political Economy Revisited: Diverse Corporate Change, Institutional Transformation, and Abenomics” starts with a short summaryof the changing perceptions of Japan’s political economy from its meteoric rise as worldwide leading model in the 1970s and 1980s to its demotiontoa problem and reform case since the later 1990s. Based on this overview, it identifies some striking issue and open questions in this conventional view of Japan’s political economy as problem and the high expectations on Abenomics as Japan’s current economic reform programme. Then we discuss the articles of the special issue and their new contributionsto a better understanding of the developments at the corporate level as well as institutional change and economic reforms at the macro level in the last two decades. Finally, this introductory article ends with a short outlineof a new research programme and four central research questions about the Japanese political economy

The evolution of the productivity dispersion of firms - A reevaluation of its determinants in the case of Japan

There is a growing body of literature analyzing empirically the evolution of productivity dispersion at the firm level and its determinants. This paper contributes to this literature by investigating the case of Japanese firms during the so-called "Lost Decade" (1992-2005), which is still under-analyzed. We use a firm-level panel dataset taken from a large-scale administrative survey, the Basic Survey of Japanese Business Structure and Activities (BSBSA) for the years 1994-2003. Our results can be summarized as follows. First, we confirm that there was an overall increase in both labor productivity and total factor productivity dispersion, especially in the manufacturing sector from 1998 onward. Second, in the case of Japanese firms during the Lost Decade, and contrary to what has been found for some other countries, we find no significant impact of the introduction of information and communication technologies (ICT) on productivity dispersion. On the other hand, we do find evidence of a significant and positive impact of internationalization on productivity dispersion. In addition, the evolution of the competitive environment appears to play a role: we find that the increase in the Hershman-Herfindahl index observed in some sectors, which characterizes a more oligopolistic environment, is associated with an increase in productivity dispersion.

Sectoral Price Dynamics in Japan: A Threshold Approach

International audienceThis paper focuses on the real - as opposed to the monetary - side of the economy to explain price dynamics in Japan between 1981 and 2001. We use a panel industry dataset to examine the impact of institutional and structural factors on the heterogeneous price dynamics in 10 manufacturing sectors. Although the evolution of unit labor costs may seem to be the driving force of these price dynamics, our analysis underlines the importance of the increasingly competitive environment, as captured by rising import penetration. Along with the decline of bargaining power of the workforce, this is a key factor underlying the deflationary pressures that characterized Japanese manufacturing industries in the 1990s

Firm-Level Labor Demand for and Macroeconomic Increases in Non-Regular Workers in Japan

This work has received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Skłodowska-Curie grant agreement No 645763.The purpose of this study is to account for the increase in non-regular workers, namely, part-time and dispatched workers, in the Japanese economy from the early 2000s. Our contribution is that we use a firm-level panel dataset extracted from an administrative survey and distinguish between the short-run and long-run determinants of non-regular labor demand. Using the estimated parameters of the labor demand function, we decompose the rate of increase in the macroeconomic non-regular worker ratio into determinant factor contributions. Our major results can be summarized as follows. First, the firm-level determinants of the demand for part-time and dispatched workers significantly differ. Second, our results suggest that the non-regular job creation stimulated by the increased female labor supply plays an essential role relative to direct demand-side factors. Third, the microeconomic demand conditions for non-regular labor are widely dispersed among firms. Neither the demand factors examined in this study nor industrial differences can explain this heterogeneity

Emergence and evolution of new industries: The path-dependent dynamics of knowledge creation. An introduction to the special section

International audienceIn this introduction, we review the arguments that underpin the rationale for the special section, and provide a structured sequence for the contents of the six selected papers that comprise the section

日本資本主義の大転換

International audienc

日本資本主義の大転換

International audienc