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The Minimum Wage in a Deflationary Economy: The Japanese Experience, 1994|2003

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  • Ryo Kambayashi
  • Daiji Kawaguchi
  • Ken Yamada

Abstract

The median wage in Japan has fallen nominally since 1999 due to a severe recession, while the statutory minimum wage has steadily increased over the same period. We used large micro-data sets from two government surveys to investigate how the minimum wage has affected wage distribution under the unusual circumstances of deflation. The compression of the lower tail of female wage distribution was almost completely explained by the increased real value of the minimum wage. The steady increases in the effective minimum wage reduced employment among low-skilled, young and middle-aged female workers, but the mechanical effect associated with disemployment on wage compression was minimal. These results held even after controlling for composition effects. The minimum wage contributed to the reduction in the pay gap between full-time and part-time workers.

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File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd09-074.pdf
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Bibliographic Info

Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd09-074.

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Date of creation: Jun 2009
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Handle: RePEc:hst:ghsdps:gd09-074

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Keywords: Minimum Wage; Wage Distribution; Wage Inequality; Employment; Deflation;

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Cited by:
  1. Chie Aoyagi & Giovanni Ganelli, 2013. "The Path to Higher Growth," IMF Working Papers 13/202, International Monetary Fund.

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