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Deflation and Downward Nominal Wage Rigidity: Evidence from Japan

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  • Kengo Yasui

    ()
    (Graduate School of Economics, Osaka University)

  • Shinji Takenaka

    ()
    (Graduate School of Economics, Osaka University)

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    Abstract

    This study empirically analyzed downward nominal wage rigidity using time-series cross-industry data from 1981 to 2002, a period which included deflation. We found that nominal wages remained rigid to downward pressure by expected deflation and labor-market tightness. Estimations according to worker age categories revealed downward wage rigidity with deflationary pressure for most age categories. Wage rigidity during labor-market tightness was greater for younger workers.

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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0521.pdf
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    Bibliographic Info

    Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 05-21.

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    Length: 34 pages
    Date of creation: Jul 2005
    Date of revision:
    Handle: RePEc:osk:wpaper:0521

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    Web page: http://www.econ.osaka-u.ac.jp/
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    Keywords: wage rigidity; nominal wage; deflation; unemployment; Japan;

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    1. McLaughlin, Kenneth J., 1994. "Rigid wages?," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 383-414, December.
    2. Kuroda, Sachiko & Yamamoto, Isamu, 2003. "Are Japanese Nominal Wages Downwardly Rigid? (Part I): Examinations of Nominal Wage Change Distributions," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(2), pages 1-29, August.
    3. 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.
    4. David Card & Dean Hyslop, 1997. "Does Inflation “Grease the Wheels of the Labor Market”?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 71-122 National Bureau of Economic Research, Inc.
    5. Katharine G. Abraham & John C. Haltiwanger, 1995. "Real Wages and the Business Cycle," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1215-1264, September.
    6. Kenneth J. McLaughlin, 1999. "Are nominal wage changes skewed away from wage cuts?," Review, Federal Reserve Bank of St. Louis, issue May, pages 117-132.
    7. Kuroda, Sachiko & Yamamoto, Isamu, 2003. "Are Japanese Nominal Wages Downwardly Rigid? (Part II): Examinations Using a Friction Model," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(2), pages 31-68, August.
    8. Joseph G. Altonji & Paul J. Devereux, 1999. "The Extent and Consequences of Downward Nominal Wage Rigidity," NBER Working Papers 7236, National Bureau of Economic Research, Inc.
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