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The Theory of Contracts and Labor Practices in Japan and the United States

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  • Yoshitsugu Kanemoto
  • W. Bentley MacLeod

Abstract

Labor management practices in Japan are quite different from those in the United States. Based on recent developments in contract theory, we develop a conceptual framework to understand why the differences have been maintained for a long period time. Our basic message is that the American and Japanese systems are two different equilibria. The distinguishing feature is the extent to which exit is used as a method of contract enforcement. In the U.S., there is a greater tendency for exit because active markets exist for senior workers. In contrast, there is virtually no market for mid career workers in Japan.

Suggested Citation

  • Yoshitsugu Kanemoto & W. Bentley MacLeod, 1988. "The Theory of Contracts and Labor Practices in Japan and the United States," Working Paper 708, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:708
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    Cited by:

    1. Henneberger, Fred & Sousa-Poza, Alfonso, 2002. "Beweggründe und Determinanten zwischenbetrieblicher Mobilität: Die Schweiz in einer internationalen Perspektive (Motives and determinants of job-to-job mobility : Switzerland in an international persp," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 35(2), pages 205-231.
    2. Andersson, Thomas, 1991. "Approaches to Partnerships Causing Asymmetries Between Japan and the West," Working Paper Series 320, Research Institute of Industrial Economics, revised Feb 1992.
    3. Oliver Gürtler, 2010. "Collusion in homogeneous and heterogeneous tournaments," Journal of Economics, Springer, vol. 100(3), pages 265-280, July.
    4. Goeschl, Timo & Jarke, Johannes, 2013. "Non-Strategic Punishment when Monitoring is Costly: Experimental Evidence on Differences between Second and Third Party Behavior," Working Papers 0545, University of Heidelberg, Department of Economics.
    5. Carstensen, Vivian, 2000. "Employment Stability via Annualized Hours Contracts," Hannover Economic Papers (HEP) dp-230, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    6. Grund, Christian, 2002. "The Wage Policy of Firms – Comparative Evidence for the U.S. and Germany from Personnel Data," IZA Discussion Papers 605, Institute of Labor Economics (IZA).
    7. Gürtler, Oliver & Kräkel, Matthias, 2010. "Optimal tournament contracts for heterogeneous workers," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 180-191, August.

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