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Do Employers Pay Efficiency Wages? Evidence from Japan

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  • SCOTT M. FUESS
  • MEGHAN MILLEA

Abstract

Economists have long been interested in the seemingly cooperative nature of Japanese industrial relations. It has been hypothesized that information sharing in the wage-setting process has been used to promote efficiency. But have Japanese employers really paid efficiency wages, that is, can productivity gains be linked to pay raises? Efforts to test for efficiency wage setting face the problem of sorting out the extent to which pay influences labor productivity and vice versa. For the 1975-1997 sample period, we used an innovative statistical technique developed by Geweke to disentangle the linear association between pay and productivity growth. Efficiency wage behavior has not been the norm in Japan. Nevertheless, efficiency wage setting cannot be ruled out for some key areas of manufacturing.

Suggested Citation

  • Scott M. Fuess & Meghan Millea, 2002. "Do Employers Pay Efficiency Wages? Evidence from Japan," Journal of Labor Research, Transaction Publishers, vol. 23(2), pages 278-292, April.
  • Handle: RePEc:tra:jlabre:v:23:y:2002:i:2:p:278-292
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    Citations

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    Cited by:

    1. Meghan Millea, 2002. "Disentangling the wage-productivity relationship: Evidence from select OECD member countries," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 8(4), pages 314-323, November.
    2. Fuess, Jr., Scott M. & Millea, Meghan, 2002. "Disentangling Pay and Productivity in a Corporatist Economy: The Case of Germany," IZA Discussion Papers 597, Institute for the Study of Labor (IZA).
    3. Millea, Meghan & Fuess, Scott Jr., 2005. "Does pay affect productivity or react to it?: Examination of U.S. manufacturing," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(4-5), pages 796-807, September.
    4. Papps, Kerry L., 2010. "Productivity under Large Pay Increases: Evidence from Professional Baseball," IZA Discussion Papers 5133, Institute for the Study of Labor (IZA).
    5. Yannick Kalantzis & Ryo Kambayashi & S├ębastien Lechevalier, 2012. "Wage and Productivity Differentials in Japan: The Role of Labor Market Mechanisms," LABOUR, CEIS, vol. 26(4), pages 514-541, December.
    6. Yang, Sheng-Ping & DeBeaumont, Ronald, 2010. "Pay as incentive or pay as reward? The case of Taiwan," Journal of Asian Economics, Elsevier, vol. 21(1), pages 76-86, February.
    7. Cael Warren & Raymond Robertson, 2011. "Globalization, Wages, and Working Conditions: A Case Study of Cambodian Garment Factories," Working Papers id:4505, eSocialSciences.
    8. Creane, Anthony, 2007. "Productivity information in vertical sharing agreements," International Journal of Industrial Organization, Elsevier, vol. 25(4), pages 821-841, August.
    9. repec:kap:iaecre:v:8:y:2002:i:4:p:314-323 is not listed on IDEAS

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