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Wage and Productivity Differentials in Japan: The Role of Labor Market Mechanisms
Author(s) -
Kalantzis Yannick,
Kambayashi Ryo,
Lechevalier Sébastien
Publication year - 2012
Publication title -
labour
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.403
H-Index - 34
eISSN - 1467-9914
pISSN - 1121-7081
DOI - 10.1111/j.1467-9914.2012.00555.x
Subject(s) - stylized fact , efficiency wage , productivity , economics , wage , labour economics , wage inequality , replicate , real wages , inequality , macroeconomics , mathematical analysis , statistics , mathematics
This paper aims at explaining two stylized facts of the Lost Decade in Japan: rising wage inequalities and increasing firm‐level productivity differentials. We build a model where firms can choose between efficiency wages with endogenous effort and competitive wages, and show that it can replicate those facts. Using Japanese microeconomic data, we find support for the existence of efficiency wages in one group of firms and competitive wages in the other group. Based on those results, a simulation shows that the share of firms using efficiency wages has declined, within sectors, during the Lost Decade, as predicted by the model.