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Are Japanese Nominal Wages Downwardly Rigid? (Part I): Examinations of Nominal Wage Change Distributions

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  • Kuroda, Sachiko

    (Institute for Monetary and Econ Studies, Bank of Japan)

  • Yamamoto, Isamu

    (Institute for Monetary and Econ Studies, Bank of Japan)

Abstract

This paper examines downward nominal wage rigidity in Japan at the individual level using Japanese longitudinal data. By observing the nominal wage change distributions and applying several statistical tests for asymmetry to them, we obtain the following findings. First, using 1993-98 data, the nominal wage change distributions are statistically skewed to the right with large spikes near the zero points, which indicates that downward nominal wage rigidity does exist in Japan. Second, the extent of the downward nominal wage rigidity is sensitive to the choice of nominal wage measures. While the extent of the downward rigidity for the hourly wages of part-time female employees is substantial, those for the regular monthly salaries and annual earnings of full-time male and female employees are limited in the sense that approximately one-fourth of the full-time employee samples experience nominal cuts. Third, for the regular monthly salaries of male employees only, the observed right-skewness of the nominal wage distributions tends to decrease as the inflation rate rises, although the analysis is limited to a period with an extremely low inflation rate.

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Bibliographic Info

Article provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.

Volume (Year): 21 (2003)
Issue (Month): 2 (August)
Pages: 1-29

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Handle: RePEc:ime:imemes:v:21:y:2003:i:2:p:1-29

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  1. Kahn, Shulamit, 1997. "Evidence of Nominal Wage Stickiness from Microdata," American Economic Review, American Economic Association, vol. 87(5), pages 993-1008, December.
  2. David E. Lebow & David J. Stockton & William L. Wascher, 1995. "Inflation, nominal wage rigidity, and the efficiency of labor markets," Finance and Economics Discussion Series 95-45, Board of Governors of the Federal Reserve System (U.S.).
  3. Kuroda, Sachiko & Yamamoto, Isamu, 2003. "Are Japanese Nominal Wages Downwardly Rigid? (Part II): Examinations Using a Friction Model," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(2), pages 31-68, August.
  4. McLaughlin, Kenneth J., 1994. "Rigid wages?," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 383-414, December.
  5. Kimura, Takeshi & Ueda, Kazuo, 2001. "Downward Nominal Wage Rigidity in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 15(1), pages 50-67, March.
  6. Shiratsuka, Shigenori, 2001. "Is There a Desirable Rate of Inflation? A Theoretical and Empirical Survey," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(2), pages 49-83, May.
  7. Fujiki, Hiroshi & Nakada, Sachiko-Kuroda & Tachibanaki, Toshiaki, 2001. "Structural Issues in the Japanese Labor Market: An Era of Variety, Equity, and Efficiency or an Era of Bipolarization?," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(S1), pages 177-208, February.
  8. Far├Ęs, J. & Hogan, S., 2000. "The Employment Costs of Downward Nominal-Wage Rigidity," Working Papers 00-1, Bank of Canada.
  9. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
  10. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
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