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The Lost Decade in the Japanese Labor Market: Labor’s share and Okun’s Law

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Author Info
Shigeru Wakita (Tokyo Metropolitan University)
Abstract

The purpose of this study is to reexamine two empirical regularities in the Japanese labor market: the constant labor share and Okun's law. The former law relates to the price of labor in the labor market while the latter is a quantity law; they represent suitable benchmarks for judging the condition of the labor market. Although there are more elaborate statistical techniques, these laws are frequently used because they can clarify the macroeconomic situation at a glance. First, a constant labor share is implied in theory by the Cobb–Douglas production function. Thus, labor’s share should be based on the production function. Labor’s share based on income has only been rising because of massive depreciation. Secondly, there have been several structural breaks in Okun's law since the bubble collapsed, and the potential growth rate has fallen.

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Paper provided by East Asian Bureau of Economic Research in its series Labor Economics Working Papers with number 673.

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Length: 20 pages
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:eab:laborw:673

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Related research
Keywords: Okun's Law; Japan; labour market; labor market; Cobb-Douglas;

Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy

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  3. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November. [Downloadable!] (restricted)
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  4. Caballero, Ricardo J. & Hammour, Mohamad L., 1998. "Jobless growth: appropriability, factor substitution, and unemployment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 51-94, June. [Downloadable!] (restricted)
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  5. Weber, Christian E, 1995. "Cyclical Output, Cyclical Unemployment, and Okun's Coefficient: A New Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(4), pages 433-45, Oct.-Dec.. [Downloadable!] (restricted)
  6. Andrew Young, 2004. "Labor's Share Fluctuations, Biased Technical Change, and the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(4), pages 916-931, October. [Downloadable!] (restricted)
  7. Clark, Peter K., 1989. "Trend reversion in real output and unemployment," Journal of Econometrics, Elsevier, vol. 40(1), pages 15-32, January. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pablo , Agnese, 2009. "Employment effects of offshoring. An application to Japanese industries, 1980-2005," MPRA Paper 16506, University Library of Munich, Germany. [Downloadable!]
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