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Deferred Compensation: Evidence from Employer-Employee Matched Data from Japan

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  • Kyoji Fukao
  • Ryo Kambayashi
  • Daiji Kawaguchi
  • Hyeog Ug Kwon
  • Young Gak Kim
  • Izumi Yokoyama

Abstract

Wage increases, along with job tenure, are one of the most robust empirical regularities found in labor economics. Several theories explain these empirical regularities, and such theories offer sharp empirical predictions for the relation between productivity-tenure and wage-tenure profiles. The human capital model, with cost and benefit sharing between workers and employers, predicts a steeper productivity-tenure profile than wage-tenure profile. The matching quality model predicts that the two profiles will overlap. Theories that involve the information asymmetry between employers and employees predict a steeper wage-tenure profile than productivity-tenure profile to induce workers' effort and enhance efficiency. This paper estimates the productivity-tenure profile and the wage-tenure profile by estimating the plant-level production function and the wage equation using employer-employee matched data from Japan. These estimations offer a comprehensive test for the relative applicability of the two theories on the wage-tenure profile. Estimation results indicate a steeper wage-tenure profile than productivity-tenure profile and point to the relative importance of the deferred wage payment contract.

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File URL: http://hi-stat.ier.hit-u.ac.jp/research/discussion/2006/pdf/D06-187.pdf
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Bibliographic Info

Paper provided by Institute of Economic Research, Hitotsubashi University in its series Hi-Stat Discussion Paper Series with number d06-187.

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Date of creation: Oct 2006
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Handle: RePEc:hst:hstdps:d06-187

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Keywords: Wage; Productivity; Employer-Employee Matched Data; Japan;

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References

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  1. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November.
  2. Christian Dustmann & Costas Meghir, 1999. "Wages, experience and seniority," IFS Working Papers W99/01, Institute for Fiscal Studies.
  3. Benoit Dostie, 2004. "Job Turnover and the Returns to Seniority," Econometric Society 2004 North American Winter Meetings 127, Econometric Society.
  4. repec:bla:restud:v:72:y:2005:i:1:p:77-108 is not listed on IDEAS
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Cited by:
  1. Dong, Xiao-Yuan & Jones, Derek C. & Kato, Takao, 2007. "Earnings-Tenure Profiles: Tests of Agency and Human Capital Theories Using Individual Performance Data," IZA Discussion Papers 3122, Institute for the Study of Labor (IZA).
  2. FUKAO Kyoji, 2013. "Explaining Japan's Unproductive Two Decades," Policy Discussion Papers 13021, Research Institute of Economy, Trade and Industry (RIETI).
  3. KODAMA Naomi & ODAKI Kazuhiko, 2012. "A New Approach to Measuring the Gap between Marginal Productivity and Wages of Workers," Discussion papers 12028, Research Institute of Economy, Trade and Industry (RIETI).
  4. Rod Tyers & Jenny Corbett, 2011. "Japan's Economic Slowdown and its Global Implications: A Review of the Economic Modelling," Economics Discussion / Working Papers 11-19, The University of Western Australia, Department of Economics.
  5. Junichi Fujimoto, 2008. "Implications of General and Specific Productivity Growth in a Matching Model," 2008 Meeting Papers 584, Society for Economic Dynamics.
  6. KONISHI Yoko & NISHIYAMA Yoshihiko, 2013. "Decomposition of Supply and Demand Shocks in the Production Function using the Current Survey of Production," Discussion papers 13003, Research Institute of Economy, Trade and Industry (RIETI).
  7. KONISHI Yoko & NISHIMURA Yoshihiko, 2013. "A Note on the Identification of Demand and Supply Shocks in Production: Decomposition of TFP," Discussion papers 13099, Research Institute of Economy, Trade and Industry (RIETI).

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