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Identifier to cite or link to this item: https://hdl.handle.net/10086/18365

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Title
Wage and Productivity Differentials in Japan : The Role of Labor Market Mechanisms
Creator
Creator Name
Gatti, Donatella Gatti, Donatella
Affiliation
Affiliation Name
CEPN-Paris 13
PSE
CEPREMAP
IZA
Creator Name
Kambayashi, Ryo Kambayashi, Ryo
神林, 龍 神林, 龍
カンバヤシ, リョウ カンバヤシ, リョウ
Affiliation
Affiliation Name
Hitotsubashi University
Creator Name
Lechevalier, Sébastien Lechevalier, Sébastien
Affiliation
Affiliation Name
EHESS (Paris)
Editor
Contributor Name
社会科学の高度統計・実証分析拠点構築 = Research Unit for Statistical and Empirical Analysis in Social Sciences
Key Word
efficiency wages
job security
effort
productivity differentials
wage inequalities
JEL
L23
J24
J31
J42
Abstract
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.
Publisher
Institute of Economic Research, Hitotsubashi University
Issued Date
2010-03
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
Global COE Hi-Stat Discussion Paper Series ; No. 127
Relation
Related Identifier
URI
  http://gcoe.ier.hit-u.ac.jp/english/index.html
Sponsorship
グローバルCOEプログラム = Global COE Program
Appears in Collections
Global COE Hi-Stat Discussion Paper Series
URL
https://hdl.handle.net/10086/18365