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Price Dynamics in Japan (1981-2001): A StructuralAnalysis of Mechanisms in the Goods and LaborMarkets

  • Nicolas Canry

    ()

    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • Julien Fouquau

    ()

    (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans)

  • Sébastien Lechevalier

    ()

    (CCJ - Chine, Corée, Japon - CNRS : UMR8173 - École des Hautes Études en Sciences Sociales (EHESS) - Université Paris VII - Paris Diderot)

This paper aims to provide an alternative framework to previous studies of deflation in Japan. We focus on the real dimension of the price dynamics and propose an imperfect competition model, which describes a rent economy, where the formation of prices can be separated into the markup (level of the rent in the goods market) and the unit labor cost (distribution of the rent in the labor market). We use a panel industry dataset to analyze the impact of institutional and structural factors on the heterogeneous price dynamics of 10 manufacturing sectors. Although the evolution of unit labor costs seems to be the driving force of price dynamics in the manufacturing industry, our structural analysis leads to consider the importance of the increasingly competitive environment, as captured by rising import penetration. Along with the decline of bargaining power of the workforce, this is at the origin of the deflationary pressures that characterized the Japanese economy during the Lost Decade.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00140624.

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Date of creation: 14 Sep 2007
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Publication status: Published - Presented, The Money Macro and Finance (MMF) Research Group, 39th Annual Conference, 2007, Birmingham, United Kingdom
Handle: RePEc:hal:cesptp:halshs-00140624
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00140624
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  1. Anindya Banerjee, 2001. "Industry structure and the dynamics of price adjustment," Applied Economics, Taylor & Francis Journals, vol. 33(15), pages 1889-1901.
  2. Assar Lindbeck & Dennis J. Snower, 1989. "The Insider-Outsider Theory of Employment and Unemployment," MIT Press Books, The MIT Press, edition 1, volume 1, number 026262074x, June.
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  13. Hans Genberg & Laurent L. Pauwels, 2004. "Wage-Price Dynamics and Deflation in Hong Kong," IHEID Working Papers 06-2004, Economics Section, The Graduate Institute of International Studies.
  14. Hurlin, Christophe, 2006. "Network effects of the productivity of infrastructure in developing countries," Policy Research Working Paper Series 3808, The World Bank.
  15. Dobbelaere, Sabien, 2004. "Estimation of price-cost margins and union bargaining power for Belgian manufacturing," International Journal of Industrial Organization, Elsevier, vol. 22(10), pages 1381-1398, December.
  16. Peng Xu, 2004. "Bankruptcy Resolution in Japan: Civil Rehabilitation vs. Corporate Reorganization," Discussion papers 04010, Research Institute of Economy, Trade and Industry (RIETI).
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