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

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Author Info

  • Kambayashi, Ryo

    ()
    (Hitotsubashi University)

  • Kawaguchi, Daiji

    ()
    (Hitotsubashi University)

  • Yamada, Ken

    ()
    (Singapore Management University)

Abstract

The statutory minimum wage has steadily increased for decades in Japan, while the median wage has fallen nominally since 1999 because of a severe recession. We use large micro-data sets from two government surveys to investigate how the minimum wage has affected the wage distribution under unusual circumstances of deflation. The compression of the lower tail of the female wage distribution is largely explained by an increased real value of the minimum wage. Steady increases in the effective minimum wage reduced employment among low-skilled, middle-aged female workers, but the mechanical effect associated with disemployment on wage compression was minimal.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4949.

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Length: 44 pages
Date of creation: May 2010
Date of revision:
Publication status: published in: Labour Economics, 2013, 24, 264-276
Handle: RePEc:iza:izadps:dp4949

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Keywords: deflation; minimum wage; wage distribution; wage inequality; employment;

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Cited by:
  1. Chie Aoyagi & Giovanni Ganelli, 2013. "The Path to Higher Growth: Does Revamping Japan’s Dual Labor Market Matter?," IMF Working Papers 13/202, International Monetary Fund.

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