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Wage and Productivity differentials in Japan. The Role of Labor Market Mechanisms

  • Kalantzis, Y.
  • Kambayashi, R.
  • Lechevalier, S.

This paper aims at explaining two stylized facts of the Lost Decade in Japan: rising wage inequalities and increasing firm-level productivity differentials. We build a model where firms can choose between efficiency wages with endogenous effort and competitive wages, and show that it can replicate those facts. Using Japanese microeconomic data, we find support for the existence of efficiency wages in one group of firms and competitive wages in the other group. Based on those results, a simulation shows that the share of firms using efficiency wages has declined, within sectors, during the Lost Decade, as predicted by the model.

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File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/working-paper_399_2012.pdf
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Paper provided by Banque de France in its series Working papers with number 399.

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Length: 45 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:bfr:banfra:399
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Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS

Web page: http://www.banque-france.fr/

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