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Employment and Wage Adjustments at Firms under Distress in Japan: An analysis based upon a survey

  • ARIGA Kenn
  • KAMBAYASHI Ryo
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    We use the result from a survey of Japanese firms in manufacturing and services to investigate the choice of wage and employment adjustments when they needed to reduce substantially the total labor cost. Our regression analysis indicates that the large size reduction favors the layoffs of core employees, whereas base wage cuts are more likely if firms do not feel immediate pressures from the external labor market or strong competition in the product market. We also find some evidence that the concerns over adverse selection or demoralizing effects of wage cuts are real. Firms do try to avoid using base wage cuts if they consider these factors more important.

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    File URL: http://www.rieti.go.jp/jp/publications/dp/09e042.pdf
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    Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 09042.

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    Length: 30 pages
    Date of creation: Aug 2009
    Date of revision:
    Handle: RePEc:eti:dpaper:09042
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    1. Kazuo Ogawa, 2003. "Financial Distress and Employment: The Japanese Case in the 90s," NBER Working Papers 9646, National Bureau of Economic Research, Inc.
    2. Takao Kato, 2003. "The Recent Transformation of Participatory Employment Practices in Japan," NBER Chapters, in: Labor Markets and Firm Benefit Policies in Japan and the United States, pages 39-80 National Bureau of Economic Research, Inc.
    3. Kuroda, Sachiko & Yamamoto, Isamu, 2005. "Wage Fluctuations in Japan after the Bursting of the Bubble Economy: Downward Nominal Wage Rigidity, Payroll, and the Unemployment Rate," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 23(2), pages 1-29, May.
    4. Kondo, Ayako, 2007. "Does the first job really matter? State dependency in employment status in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 21(3), pages 379-402, September.
    5. William H. Branson & Julio J. Rotemberg, 1979. "International Adjustment with Wage Rigidity," NBER Working Papers 0406, National Bureau of Economic Research, Inc.
    6. Giuseppe Bertola & Aurelijus Dabušinskas & Marco Hoeberichts & Mario Izquierdo & Claudia Kwapil & Jérémi Montornès & Daniel Radowski, 2010. "Price, wage and employment response to shocks : evidence from the WDN survey," Bank of Estonia Working Papers wp2010-07, Bank of Estonia, revised 26 May 2010.
    7. Tachibanaki, Toshiaki, 1987. "Labour market flexibility in Japan in comparison with Europe and the U.S," European Economic Review, Elsevier, vol. 31(3), pages 647-678, April.
    8. Kato, Takao, 2001. "The End of Lifetime Employment in Japan?: Evidence from National Surveys and Field Research," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 489-514, December.
    9. Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2008. "Zombie Lending and Depressed Restructuring in Japan," American Economic Review, American Economic Association, vol. 98(5), pages 1943-77, December.
    10. Fumio OHTAKE, 2008. "Inequality in Japan," Asian Economic Policy Review, Japan Center for Economic Research, vol. 3(1), pages 87-109.
    11. Isamu Yamamoto, 2008. "Changes in Wage Adjustment, Employment Adjustment and Phillips Curve: Japan's Experience in the 1990s," Keio/Kyoto Joint Global COE Discussion Paper Series 2008-024, Keio/Kyoto Joint Global COE Program.
    12. Kimura, Takeshi & Ueda, Kazuo, 2001. "Downward Nominal Wage Rigidity in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 15(1), pages 50-67, March.
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