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Employment and Wage Adjustments at Firms under Distress in Japan: An Analysis Based upon a Survey

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Author Info
Kenn Ariga (Institute of Economic Research, Kyoto University)
Ryo Kambayashi (Institute of Economic Research, Hitotsubashi University)
Abstract

We use the result from a survey of Japanese firms in manufacturing and service to investigate the choice of wage and employment adjustments when they needed to reduce substantially the total labor cost. Our regression analysis indicates that the large size reduction favors the layoffs of the core employees, whereas the base wage cuts are more likely if the firms do not feel immediate pressures from the external labor market or the strong competition in the product market. We also find some evidence that the concerns over adverse selection or demoralizing effects of wage cuts are real. Firms do try to avoid using base wage cuts if they consider these factors more important.

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Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 668.

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Date of creation: Jan 2009
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Handle: RePEc:kyo:wpaper:668

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  1. Kondo, Ayako, 2007. "Does the first job really matter? State dependency in employment status in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 21(3), pages 379-402, September. [Downloadable!] (restricted)
  2. Kato, Takao, 2001. "The End of Lifetime Employment in Japan?: Evidence from National Surveys and Field Research," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 489-514, December. [Downloadable!] (restricted)
  3. Branson, William H. & Rotemberg, Julio J., 1980. "International adjustment with wage rigidity," European Economic Review, Elsevier, vol. 13(3), pages 309-332, May. [Downloadable!] (restricted)
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  4. Kimura, Takeshi & Ueda, Kazuo, 2001. "Downward Nominal Wage Rigidity in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 15(1), pages 50-67, March. [Downloadable!] (restricted)
  5. Kazuo Ogawa, 2003. "Financial Distress and Employment: The Japanese Case in the 90s," NBER Working Papers 9646, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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