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

Author

Listed:
  • Kambayashi, Ryo

    () (Hitotsubashi University)

  • Kawaguchi, Daiji

    () (University of Tokyo)

  • Yamada, Ken

    () (Singapore Management University)

Abstract

The statutory minimum wage has steadily increased for decades in Japan, while the median wage has fallen nominally since 1999 because of a severe recession. We use large micro-data sets from two government surveys to investigate how the minimum wage has affected the wage distribution under unusual circumstances of deflation. The compression of the lower tail of the female wage distribution is largely explained by an increased real value of the minimum wage. Steady increases in the effective minimum wage reduced employment among low-skilled, middle-aged female workers, but the mechanical effect associated with disemployment on wage compression was minimal.

Suggested Citation

  • Kambayashi, Ryo & Kawaguchi, Daiji & Yamada, Ken, 2010. "The Minimum Wage in a Deflationary Economy: The Japanese Experience, 1994-2003," IZA Discussion Papers 4949, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4949
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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. Kyota Eguchi, 2010. "Minimum Wages and Trainers' Dilemma," LABOUR, CEIS, vol. 24(2), pages 128-138, June.
    3. 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

    deflation; minimum wage; wage distribution; wage inequality; employment;

    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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