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Earnings and seniority in Japan: A re-appraisal of the existing evidence and a comparison with the UK

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  • Brunello, Giorgio
  • Ariga, Kenn

Abstract

Standard estimates of earnings profiles ignore the fact that, with unobserved heterogeneity, cross-section evidence need not reflect the `true' relationship between earnings and tenure. In this paper we argue that the observation of the position filled by an employee in the firm hierarchy is informative about both his/her quality and the quality of his/her match. Under certain assumptions, this information can be used to construct an unbiased estimator of the effects of tenure on earnings growth. We apply this simple idea to Japanese and UK data. We find that tenure effects on earnings are positive but smaller than the effects estimated with the traditional approach. In a comparative perspective, we also find that UK and Japanese earnings profiles are rather similar in banking and finance and remarkably different in manufacturing.
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Suggested Citation

  • Brunello, Giorgio & Ariga, Kenn, 1997. "Earnings and seniority in Japan: A re-appraisal of the existing evidence and a comparison with the UK," Labour Economics, Elsevier, vol. 4(1), pages 47-69, March.
  • Handle: RePEc:eee:labeco:v:4:y:1997:i:1:p:47-69
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    References listed on IDEAS

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    1. Marshall, Robert C & Zarkin, Gary A, 1987. "The Effect of Job Tenure on Wage Offers," Journal of Labor Economics, University of Chicago Press, vol. 5(3), pages 301-324, July.
    2. repec:fth:harver:1532 is not listed on IDEAS
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    16. Clark, Robert L & Ogawa, Naohiro, 1992. "Employment Tenure and Earnings Profiles in Japan and the United States: Comment," American Economic Review, American Economic Association, vol. 82(1), pages 336-345, March.
    17. Collier, P & Knight, J B, 1985. "Seniority Payments, Quit Rates, and Internal Labour Markets in Britain and Japan," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 47(1), pages 19-32, February.
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    Cited by:

    1. Satoshi Shimizutani & Izumi Yokoyama, 2006. "Has Japan's Long-term employment Practice Survived? New Evidence Emerging Since the 1990s," Hi-Stat Discussion Paper Series d06-182, Institute of Economic Research, Hitotsubashi University.
    2. Ariga, Kenn & Brunello, Giorgio & Ohkusa, Yasushi, 1997. "Promotions, Skill Formation, and Earnings Growth in a Corporate Hierarchy," Journal of the Japanese and International Economies, Elsevier, vol. 11(3), pages 347-384, September.
    3. Nobuko Nagase & Mary C. Brinton, 2017. "The gender division of labor and second births: Labor market institutions and fertility in Japan," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 36(11), pages 339-370, January.

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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