Trade and the Wage Structure in the Presence of Price Differentials in the Product Market: The Japanese Labor Market 1965–1990

The decomposition of demand into domestic, export, and import components in a cross-industry study of 18 two-digit manufacturing industries suggests that export growth has less of an impact on interindustry wage differentials than the equivalent growth in domestic demand. The difference seems to be greatest in the case of full-time workers in large firms. This result for Japan is different from those of similar studies for the United States and is consistent with a model of industry rent-sharing with domestic–international price differentials in the product market.J. Japan. Int. Econ., March 1999,13(1), pp. 22–43. Nissan Institute of Japanese Studies, Oxford University, 27 Winchester Rd., Oxford OX2 6NA, EnglandCopyright 1999 Academic Press.Journal of Economic LiteratureClassification Numbers: F14, J31.     

Downward Nominal Wage Rigidity in Japan

This paper analyzes whether or not Japanese nominal wages exhibit downward rigidity. We posit a wage adjustment model in which, below a certain wage inflation rate, wages may or may not move as much as optimal or notional wages do. By using data on wages of 18 industries and aggregate time series data, we find that nominal wages were rigid downward until 1998, but not with the inclusion of years 1999 and 2000. That is, Japanese wages responded flexibly downward to the recession of 1997–1998, but with a lag. The interpretation of such results is not straightforward. But we provide some preliminary discussions of possible factors behind such a pattern of wage movements, focusing on the relationship between wage changes and the seniority-based wage system. J. Japan. Int. Econ., March 2001, 15(1), pp. 50–67. The Bank of Japan, Chuo-ku, Tokyo 103-0021, Japan. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: E24, E31, J30.     

Nonprofit/for-profit status and earning differentials in the Japanese at-home elderly care industry: Evidence from micro-level data on home helpers and staff nurses

In April 2000, Japan embarked on a reform of its health care market. Along with the introduction of a long-term care insurance scheme, the government for the first time allowed for-profit operators to compete head-on with non-profit operators in the provision of at-home care services. Taking advantage of a unique and rich micro-level survey, this study is the first to examine wage differentials between the nonprofit and the for-profit sectors in Japan's nursing care industry, concentrating on home helpers and staff nurses. Controlling for nonrandom unobserved selection biases, our results show that a nonprofit wage premium exists. This finding supports the hypothesis that nonprofit providers operate under non-distributional constraints. J. Japanese Int. Economies 21 (1) (2007) 106–120.     

Why Are There Rich and Poor Countries? Symmetry Breaking in the World Economy: A Note

This paper extends K. Matsuyama (1996, Journal of the Japanese and International Economies, 10, 419–439) to allow for the presence of a fixed factor such as land. By assuming that agricultural production is more land-intensive than manufacturing production, we generalized Matsuyama's results on symmetry breaking in the world economy. That is, international trade by causing an agglomeration of economic activities in different countries of the world makes inevitable the coexistence of rich and poor. J. Japan. Int. Econ. June 1999, 13(2), pp. 140–149. Department of Economics, Tufts University, Medford, Massachusetts 02155. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: F12 and O12.     

The effect of globalization on union bargaining and price-cost margins of firms

In recent years, Europe has witnessed an accelerated process of economic integration. This paper analyzes how increased economic integration has affected labor and product markets. We use a panel of Belgian manufacturing firms to estimate price-cost margins and union bargaining power and show how various measures of globalization affect them. Import competition puts pressure on both markups and union bargaining power, especially when there is increased competition from low wage countries. This suggests that increased globalization is associated with a moderation of wage claims in unionized countries, which should be associated with positive effects on employment.

Productivity loss and reinstatement as a legal remedy for unjust dismissal

There are two types of legal remedies for unjust dismissal, damages or reinstatement. Although workers' motivation is negatively influenced by employment adjustments such as a wage cut or layoffs, fired workers can receive a remedy when they are protected by dismissal regulations. We consider which legal remedy policy is better, damages or reinstatement, from the viewpoint of workers' motivation at workplaces. Under a reinstatement policy, firms are more likely to make an employment adjustment, and reinstatement is dominated by damages from the viewpoint of social welfare when the productivity loss caused by employment adjustment is minor. On the other hand, when the productivity loss is serious, employment adjustment is more likely made under the damages policy, and reinstatement can be desirable. J. Japanese Int. Economies 21 (1) (2007) 78–105.     

Debt,R&D investment and technological progress: A panel study of Japanese manufacturing firms' behavior during the 1990s

Based on a panel data set of Japanese manufacturing firms in research-intensive industries, we investigate quantitatively the extent to which outstanding debt affected firms' R&D activities during the 1990s. We find that massive amounts of outstanding debt had a significant, negative effect on R&D investment during that time. We also find that R&D expenditures were closely linked to firm-level total factor productivity growth over the same period. In fact, a ten-percentage-point increase in the debt–asset ratio lowered the rate of firm-level total factor productivity growth by 0.26 percentage points between 1999 and 2001, because it reduced R&D activities. J. Japanese Int. Economies 21 (4) (2007) 403–423.     

Measuring the Liquidity Effect: The Case of Japan

In this paper, we measure the liquidity effect in Japan, complementing the work done by F. Hayashi (2001, Int. Econ. Rev.42, 287–316) and compare it to the liquidity effect in the United States. Since institutional features are similar across these two countries, we apply J. Hamilton's (1997, Amer. Econ. Rev.87, 80–97; 1998, Carnegie-Rochester Conf. Ser. Public Pol. 49, 1–44) methodology to estimate the liquidity effect for each day of the maintenance period. Detailed daily data supplied by the Bank of Japan enable us to obtain more accurate estimates for Japan. Our key findings, which are not found in F. Hayashi (2001, Int. Econ. Rev.42, 287–316) are as follows: (1) On the final day of a reserve maintenance period, both countries show the strongest evidence of the liquidity effect, and (2) in both countries the liquidity effect tends to be larger and more statistically significant toward the end of the period. J. Japan. Int. Econ., September 2002, 16(3), pp. 289–316. Ministry of Economy, Trade and Industry, 1-3-1 Kasumigaseki, Chiyoda-ku, Tokyo 100-8901, Japan. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: E43, E44, E52.     

Black–White Wage Differentials in a Multiple Sample Selection Bias Model

This paper simultaneously incorporates two sources of selection bias in the black-white wage equations. It demonstrates that the biases due to an individual’s propensity to be in the labor force and the firm’s hiring practices are important in determining the black–white wage differential and failure to account for both biases will result in inaccurate estimation of the black–white wage differential. We found that adjusting for double selection bias in the wage equation, the black–white female wage gap is 26% larger than the black–white male wage gap, and 12.1% larger when we adjust for a single selection bias. The results seem to suggest that at the macro level, the enforcement of policies related to racial issues in the labor market will likely lead to a reduction in the black–white wage gap.

Biased Technological Change and Japanese Manufacturing Employment

This paper examines the effect of technological change on the demand for production and nonproduction workers of the Japanese manufacturing industries since the 1980s. First, a decomposition of the change in the share of nonproduction workers in total employment into between-industry shifts and within-industry shifts reveals that the within-industry shifts were dominant in the 1980s. Second, cross-sectional regressions show that investment in computers has had a significant impact on increasing the share of the wage-bill held by nonproduction workers. These findings suggest that skill-biased technological change is at work in Japanese manufacturing industries. J. Japan. Int. Econ., September 2001, 15(3), pp. 298–322. Development Bank of Japan, 1-9-3 Otemachi, Chiyoda-ku, Tokyo 100-0004, Japan. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: J23, J31, O30.     

Global Outsourcing and Wage Inequality in Middle-Income Countries: Evidence from South Korea

A substantial number of studies have suggested that global outsourcing can induce wage inequality. As Feenstra and Hanson [(1996a) Foreign investment, outsourcing, and relative wage, in: R. C. Feestra, G. M. Hanson, and D. A. Irwin (Eds.) Political Economy of Trade Policy: Essays in Honor of Jagdish Bhagwati (Cambridge: The MIT Press), pp. 89–127] argued, global outsourcing is comparable to skill-biased technological change in that global outsourcing is more likely to increase the wage of skilled workers rather than their unskilled counterparts. We examine the effects of outsourcing on wage of skilled and unskilled workers in Korea's manufacturing sector with a focus on the dissimilar effects of outsourcing to developed countries (DCs) and less developed countries (LDCs) on relative wage. The results of system and difference GMM estimation based on manufacturing data from 1992 to 2006 indicate that outsourcing to DCs and LDCs have opposite (and significant) effects on relative wage, that is, outsourcing to DCs (LDCs) decreases the wage of skilled (unskilled) workers.     

Climbing the Technology Ladder Too Fast? New Evidence on Comparative Productivity Performance in Asian Manufacturing

This paper attempts to shed new light on the debate about the sources of rapid growth in Asian manufacturing. For the period from 1963 to 1997, a comparison of productivity levels in India, Indonesia, South Korea, and Taiwan with the United States as the reference country is provided. Using the industry-of-origin approach to international comparisons, varying development patterns are found for seven major manufacturing branches. Nevertheless, for all branches gaps in relative labor productivity and total factor productivity with the United States appeared to be big. Based on a technology ladder model, it is argued that low productivity might be due to rapid introduction of new technologies, leaving little time for efficient assimilation. J. Japan. Int. Econ., March 2002, 16(1) pp. 50–72. Groningen Growth and Development Center, Faculty of Economics, University of Groningen, Groningen, the Netherlands. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: N15, 047, 057.     

The Impact of Racial Discrimination on the Early Career Outcomes of Young Men

The NLSY dataset is utilized to measure the extent of employer wage discrimination between white and black males during their first 5 years of post-school employment. We look at the respondent’s first job and the jobs 1 and 5 years after school completion. Oaxaca wage decompositions are employed to gauge the effect of discrimination. Consistent with our hypothesis, we find that the discrimination component of the wage gap falls over time. For the first job out of school the unexplained wage gap between blacks and whites is 35%. By year 5, the unexplained component falls to about 13%. Thus, while discrimination continues to play a role in explaining the white–black wage gap over time, its impact decreases as time in the labor market increases.

Long-Run Relationship between Consumption and Income in Japan: Tests of the Deterministic Cointegration Restriction

This paper reexamines two versions of the permanent income hypothesis derived from R. E. Hall (1978, J. Polit. Econ.86, 971–987) and R. G. King, C. L. Plosser, J. H. Stock, and M. W. Watson (1991, Amer. Econ. Rev.81, 819–840) using Japanese quarterly data. The main focus is on the relationship between stochastic and deterministic trends of consumption and income. It is found that the deterministic cointegration restriction implied by the two models is strongly rejected in Japan in contrast to the U.S. result, and the rejection of King et al.'s model depends on the existence of a trend break. This finding suggests that the postwar Japanese economy experienced the change in a steady state path considered by the neoclassical growth model. J. Japan. Int. Econ., June 2002, 16(2) pp. 253–278. Graduate School of Economics, Hitotsubashi University, 2-1 Naka Kunitachi, Tokyo 186-8601, Japan. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: C32, E21.     

Part-time workers doing full-time work in Japan

This paper is concerned with the phenomenon of part-time workers performing similar types of jobs to full-time workers in the same workplace. We use data from Japan's Survey on Diversified Types of Employment to answer two questions. First, why are firms increasingly employing part-time workers in jobs traditionally offered to full-time workers? Second, what are the characteristics of the workers taking these jobs? As for the former, it is primarily service sector firms using this new work relationship. Interestingly, there is evidence that manufacturing firms are outsourcing in lieu of hiring domestic part-time workers. On a positive note, we find evidence that part-time workers are screened by firms for full-time jobs. As to the second question, the workers are primarily professionals working long hours. As an aside, based on our data we find no evidence that part-time workers are more likely to be involuntarily employed in full-time jobs than in non full-time jobs. J. Japanese Int. Economies 21 (4) (2007) 435–454.     

Career Concerns and the Acquisition of Firm-Specific Skills

This paper studies incentive schemes that can motivate a worker to acquire nonverifiable firm-specific skills, when the acquisition process is also one of learning about managerial talent. At the beginning of the employment relationship, the worker encounters opportunities to enhance his or her specific human capital. Greater skills may increase the chances of being promoted, but as more opportunities are taken, more is learned about the worker's intrinsic talent, and someone displaying low talent is sure not to be promoted. In this context we show that first-best firm-specific skills collection can be implemented with a scheme that combines discretionary promotions, an appropriate wage schedule and subsidies of training at the margin. J. Japan. Int. Econ., September 2000, 14(3), pp. 204–217. École Polytechnique de Montréal and CIRANO, Montréal, Québec H3A 2A5, Canada; INSEAD, 77305 Fontainebleau, France. Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: M12, J24.     

Employment and wage adjustments at firms under distress in Japan: An analysis based upon a survey

We use the result from a survey of Japanese firms in manufacturing and service to investigate the choice of wage and employment adjustments when they needed to reduce substantially the total labor cost. Our regression analysis indicates that the large size reduction favors the layoffs of the core employees, whereas the base wage cuts are more likely if the firms do not feel immediate pressures from the external labor market or the strong competition in the product market. We also find some evidence that the concerns over adverse selection or demoralizing effects of wage cuts are real. Firms do try to avoid using base wage cuts if they consider these factors more important.     

Determinants of Trade Credit in the Japanese Manufacturing Sector

This paper examines the determinants of trade credit in Japanese manufacturing companies. The empirical analysis presents evidence that the volume of trade credit is influenced not only by transactional factors but also by financial positions. The empirical test reveals that firms' future business prospects affect the volume of trade credit. Notably, for small firms whose liquidity is constrained, nontransactional factors such as an increase in cash flow reduce the need for trade credit. This paper also finds that trade payables act as a complement to bank loans. The quantitative relationship between trade payables and bank loans suggests that when monetary policy works in the financial markets, it also influences the trade-related credit markets. J. Japan. Int. Econ., June 2001, 15(2), pp. 160–177. Department of Economics, Fukushima University, 1 Kanayagawa, Fukushima-shi, Fukushima 960-1296, Japan. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: E52, G32.     

Can the HOSS framework help shed light on the simultaneous growth of inequality and informalization in developing countries?

Using simple, modified versions of the factor proportions framework, and focusing on structural features within developing economies, this paper attempts to reconcile puzzling developments observed in many post-reform, post-liberalization countries whereby increasing income inequality has emerged side-by-side with informalization of the economy. Measures undertaken to enhance public sector efficiency and attract investment in an import-intensive export sector may increase rental–wage and skilled–unskilled wage gaps, contra the predictions of the simple Heckscher–Ohlin–Stolper–Samuelson (HOSS) framework regarding skill- and capital-scarce countries. The common thread generating our interesting results is the presence of sectors that are even more labor-intensive than those producing traded goods.