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Price Dynamics in Japan (1981-2001): A StructuralAnalysis of Mechanisms in the Goods and LaborMarkets

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  • Nicolas Canry

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • Julien Fouquau

    ()
    (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans)

  • Sébastien Lechevalier

    ()
    (CCJ - Chine, Corée, Japon - CNRS : UMR8173 - École des Hautes Études en Sciences Sociales (EHESS) - Université Paris VII - Paris Diderot)

Abstract

This paper aims to provide an alternative framework to previous studies of deflation in Japan. We focus on the real dimension of the price dynamics and propose an imperfect competition model, which describes a rent economy, where the formation of prices can be separated into the markup (level of the rent in the goods market) and the unit labor cost (distribution of the rent in the labor market). We use a panel industry dataset to analyze the impact of institutional and structural factors on the heterogeneous price dynamics of 10 manufacturing sectors. Although the evolution of unit labor costs seems to be the driving force of price dynamics in the manufacturing industry, our structural analysis leads to consider the importance of the increasingly competitive environment, as captured by rising import penetration. Along with the decline of bargaining power of the workforce, this is at the origin of the deflationary pressures that characterized the Japanese economy during the Lost Decade.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00140624.

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Date of creation: 14 Sep 2007
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Publication status: Published - Presented, The Money Macro and Finance (MMF) Research Group, 39th Annual Conference, 2007, Birmingham, United Kingdom
Handle: RePEc:hal:cesptp:halshs-00140624

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00140624
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Keywords: Deflation; Japanese Economy; Wage Bargaining; Markup; Deregulation; Panel Threshold Regression;

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  1. Peter C.B. Phillips & Hyungsik R. Moon, 1999. "Linear Regression Limit Theory for Nonstationary Panel Data," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1222, Cowles Foundation for Research in Economics, Yale University.
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Cited by:
  1. Nicolas Canry & Julien Fouquau & Sebastien Lechevalier, 2011. "Sectoral Price Dynamics in Japan: A Threshold Approach," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers), HAL hal-00945036, HAL.

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