Advanced Search
MyIDEAS: Login to save this paper or follow this series

Why U.S. Wage and Employment Behavior Differs from That in Britain and Japan

Contents:

Author Info

  • Robert J. Gordon

Abstract

This paper argues that rigid wages cannot provide the underpinnings of a universally valid theory of the business cycle, simply because wages are not universally rigid. Several different statistical techniques suggest that wage rates in the U.K. and Japan are between three and 15 times more flexible than in the U.S. during the postwar period. Corresponding to greater flexibility in wages, these two countries also exhibit more stable employment behavior over the business cycle. In historical data covering the period between the late-nineteenth-century and 1940, U.S. wage behavior appears to be much more similar to that in Britain and Japan. The contrast between the prewar data and the postwar data, where the U.S. is a definite outlier, suggests that the 1948 invention of the three-year staggered U.S. wage contract may be the crucial factor underlying sluggish U.S. postwar wage dynamics. A theoretical section attempts to distill from recent literature those features of labor market institutions that are regarded as optimal by economic theory. Japanese institutions exhibit more similarity to this theoretical paradigm than those in the U.S. or U.K. Economic theory predicts that long-duration contracts, like those in the postwar U.S., are more likely to emerge when the perceived cost of renegotiation is high, but we must appeal to history and cultural differences to explain why conflict avoidance plays a more prominent role in the development of Japanese labor market institutions than in the American case. In this comparison Britain is the odd-man-out, with well-publicized industrial strife, together with short contract durations. I appeal to history, the different legal tradition, and the nature of the British unions themselves to explain why the three-year contract became established in America but not in Britain.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w0809.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0809.

as in new window
Length:
Date of creation: Nov 1981
Date of revision:
Publication status: published as Gordon, Robert J. "Why U.S. Wage and Employment behavior Differs from Thatin Britain and Japan." The Economic Journal, Vol. 92, No. 365, (March 1982) , pp. 13-44.
Handle: RePEc:nbr:nberwo:0809

Note: EFG
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Barro, Robert J., 1977. "Long-term contracting, sticky prices, and monetary policy," Journal of Monetary Economics, Elsevier, Elsevier, vol. 3(3), pages 305-316, July.
  2. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
  3. George A. Akerlof, 1978. "A theory of social custom, of which unemployment may be one consequence," Special Studies Papers, Board of Governors of the Federal Reserve System (U.S.) 118, Board of Governors of the Federal Reserve System (U.S.).
  4. James L. Medoff & Katharine G. Abraham, 1980. "Experience, Performance, and Earnings," NBER Working Papers 0278, National Bureau of Economic Research, Inc.
  5. Baily, Martin Neil, 1974. "Wages and Employment under Uncertain Demand," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 41(1), pages 37-50, January.
  6. William H. Branson & Julio J. Rotemberg, 1991. "International Adjustment with Wage Rigidity," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 13-44 National Bureau of Economic Research, Inc.
  7. George L. Perry, 1975. "Determinants of Wage Inflation Around the World," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(2), pages 403-448.
  8. Gray, Jo Anna, 1978. "On Indexation and Contract Length," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 86(1), pages 1-18, February.
  9. Dale T. Mortensen, 1982. "The Matching Process as a Noncooperative Bargaining Game," NBER Chapters, in: The Economics of Information and Uncertainty, pages 233-258 National Bureau of Economic Research, Inc.
  10. Barro,Robert J. & Grossman,Herschel I., 2008. "Money Employment and Inflation," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521068659.
  11. Frye, Jon & Gordon, Robert J, 1981. "Government Intervention in the Inflation Process: The Econometrics of "Self-Inflicted Wounds"," American Economic Review, American Economic Association, American Economic Association, vol. 71(2), pages 288-94, May.
  12. Grossman, Herschel I, 1977. " Risk Shifting and Reliability in Labor Markets," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 79(2), pages 187-209.
  13. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  14. Robert E. Cole, 1972. "Permanent employment in Japan: Facts and fantasies," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 26(1), pages 615-630, October.
  15. Hashimoto, Masanori, 1979. "Bonus Payments, on-the-Job Training, and Lifetime Employment in Japan," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(5), pages 1086-1104, October.
  16. Brunner, Karl & Meltzer, Allan H., 1977. "Stabilization of the domestic and international economy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 5(1), pages 1-6, January.
  17. William D. Nordhaus, 1972. "The Worldwide Wage Explosion," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 3(2), pages 431-466.
  18. Gordon, Donald F, 1974. "A Neo-Classical Theory of Keynesian Unemployment," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 12(4), pages 431-59, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Hart, Robert A. & Malley, James R. & Ruffell, Robin J., 1996. "What shapes are overtime premium schedules? Some evidence from Japan, the UK, and the US," Economics Letters, Elsevier, Elsevier, vol. 53(1), pages 97-102, October.
  2. Kawai, Eizo, 2001. "Re-examination of wage, employment, and hours adjustments: what is crucial for differences in the adjustments?," Japan and the World Economy, Elsevier, Elsevier, vol. 13(4), pages 483-497, December.
  3. Robert A Hart & James R Malley, 1995. "Marginal Cost and Price Over the Business Cycle: Comparative Evidence from Japan and the United States," Working Papers Series 95/13, University of Stirling, Division of Economics.
  4. Yamane, Linus, 1998. "The insider-outsider model and Japanese labor unions," Japan and the World Economy, Elsevier, Elsevier, vol. 10(2), pages 157-171, April.
  5. John B. Taylor, 1982. "Union Wage Settlements During a Disinflation," NBER Working Papers 0985, National Bureau of Economic Research, Inc.
  6. Dighe, Ranjit S. & Schmitt, Elizabeth Dunne, 2010. "Did U.S. wages become stickier between the world wars?," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 21(2), pages 165-181, August.
  7. Nakabayashi, Masaki, 2011. "Schooling, employer learning, and internal labor market effect: Wage dynamics and human capital investment in the Japanese steel industry, 1930-1960s," MPRA Paper 30749, University Library of Munich, Germany, revised 06 May 2011.
  8. Higashi, Youichiro, 2002. "Firm specific human capital and unemployment in a growing economy," Japan and the World Economy, Elsevier, Elsevier, vol. 14(1), pages 35-44, January.
  9. Seltzer, Andrew, 2010. "Did firms cut nominal wages in a deflationary environment?: Micro-level evidence from the late 19th and early 20th century banking industry," Explorations in Economic History, Elsevier, Elsevier, vol. 47(1), pages 112-125, January.
  10. Keating, John W. & Nye, John V., 1999. "The Dynamic Effects of Aggregate Demand and Supply Disturbances in the G7 Countries," Journal of Macroeconomics, Elsevier, Elsevier, vol. 21(2), pages 263-278, April.
  11. Johnes, Geraint & Tanaka, Yasuhide, 2008. "Changes in gender wage discrimination in the 1990s: A tale of three very different economies," Japan and the World Economy, Elsevier, Elsevier, vol. 20(1), pages 97-113, January.
  12. Darby, Julia & Hart, Robert A. & Vecchi, Michela, 2001. "Labour force participation and the business cycle: a comparative analysis of France, Japan, Sweden and the United States," Japan and the World Economy, Elsevier, Elsevier, vol. 13(2), pages 113-133, April.
  13. Victor Zarnowitz, 1989. "Cost and Price Movements in Business Cycle Theories and Experience: Hypotheses of Sticky Wages and Prices (SEE ALSO WP3132-send out together)," NBER Working Papers 3131, National Bureau of Economic Research, Inc.
  14. Maria Scattaglia, 1994. "Politiche per l'occupazione e Microfondamenti "Keynesiani" dell'economia del lavoro," Working Papers 196, Dipartimento Scienze Economiche, Universita' di Bologna.
  15. Julia Darby & Robert A Hart & Michaela Vecchi, 1998. "Labour Force Participation and the Business Cycle: A Comparative Analysis of Europe, Japan and the United States," Working Papers, Business School - Economics, University of Glasgow 9802, Business School - Economics, University of Glasgow.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0809. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.