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Inter-Industry and Firm Size Effects on Wage Differentials and Efficiency Wages in Japan

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  • Masahiro Abe
  • Isao Ohashi

Abstract

This paper analyzes the effects of inter-industry and firm size on wage differentials,focusing on how their estimated effects vary by the introduction of elements indicating firm characteristics such as wage-experience profiles.Using the worker-establishment matched data, we find that inter-industry effects are larger than firm size ones judging from their explanatory powers and the wage distributions caused by them although the introduction of firm characteristics reduces more the effect of industry. Since this paper is based on the efficiency wage hypothesis to explain wage differentials, it is required to test for the bonding critique. Checking how steeper wage profiles affect wages of young workers, we find that even those who work at firms where wage profiles are steeply rising are not paid lower. This result supports the efficiency wage hypothesis to be a good explanation for wage differentials.

Suggested Citation

  • Masahiro Abe & Isao Ohashi, 2004. "Inter-Industry and Firm Size Effects on Wage Differentials and Efficiency Wages in Japan," Hi-Stat Discussion Paper Series d04-25, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hst:hstdps:d04-25
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    File URL: http://hi-stat.ier.hit-u.ac.jp/research/discussion/2004/pdf/D04-25.pdf
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    References listed on IDEAS

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    Cited by:

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    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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