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Why has the Unemployment Rate Been so Low in Japan? An Explanation by Two‐Part Wage Bargaining

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  • Shigeru Wakita

Abstract

The Japanese wage payment system is considered from a perspective of two‐part tariff pricing. Using the “amusement park” analogy, Shunto wages can be regarded as an “entrance fee”, whereas bonuses are a “variable charge”. Empirical investigation showed that a qualitative difference exists between these two types of wage: Shunto sets the coordinated wage rate by focusing on the whole labour market condition, while bonuses respond to idiosyncratic shock. Based on the standard prediction of two‐part wage tariff pricing, such a unique combination is the ultimate source of Japan's low unemployment. JEL Classification Number: J51.

Suggested Citation

  • Shigeru Wakita, 2001. "Why has the Unemployment Rate Been so Low in Japan? An Explanation by Two‐Part Wage Bargaining," The Japanese Economic Review, Japanese Economic Association, vol. 52(1), pages 116-133, March.
    • Handle: RePEc:bla:jecrev:v:52:y:2001:i:1:p:116-133
    DOI: 10.1111/1468-5876.00185
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    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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