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The Minimum Wage in a Deflationary Economy: The Japanese Experience, 1994 |2003

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  • Ryo Kambayashi
  • Daiji Kawaguchi
  • Ken Yamada

Abstract

The median wage in Japan has fallen nominally since 1999 due to a severe recession, while the statutory minimum wage has steadily increased over the same period. We used large micro-data sets from two government surveys to investigate how the minimum wage has affected wage distribution under the unusual circumstances of deflation. The compression of the lower tail of female wage distribution was almost completely explained by the increased real value of the minimum wage. The steady increases in the effective minimum wage reduced employment among low-skilled, young and middle-aged female workers, but the mechanical effect associated with disemployment on wage compression was minimal. These results held even after controlling for composition effects. The minimum wage contributed to the reduction in the pay gap between full-time and part-time workers.

Suggested Citation

  • Ryo Kambayashi & Daiji Kawaguchi & Ken Yamada, 2009. "The Minimum Wage in a Deflationary Economy: The Japanese Experience, 1994 |2003," Global COE Hi-Stat Discussion Paper Series gd09-074, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hst:ghsdps:gd09-074
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    File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd09-074.pdf
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    Cited by:

    1. Aoyagi, Chie & Ganelli, Giovanni, 2015. "Does revamping Japan's dual labor market matter?," Economic Systems, Elsevier, vol. 39(2), pages 339-357.
    2. Chie Aoyagi & Giovanni Ganelli, 2013. "The Path to Higher Growth; Does Revamping Japan’s Dual Labor Market Matter?," IMF Working Papers 13/202, International Monetary Fund.

    More about this item

    Keywords

    Minimum Wage; Wage Distribution; Wage Inequality; Employment; Deflation;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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