Labour market regimes, technology and rent-sharing in Japan

Abstract

This paper focuses on rent-sharing as a potential driver of wage patterns in different labour market and technological regimes. The extent and drivers of the sensitivity of wages to rents have recently regained the attention of scholars and public opinion in developed countries but remain under-researched with respect to Japan. To fill this gap, we investigate the factors shaping the heterogeneity of rent-sharing based on detailed industry-level data from over four decades (1970–2012) on the Japanese economy, where technological dynamics have been paralleled by labour market evolutions similar to many advanced OECD countries (deunionization, declines in standard employment and in the role of seniority). Our results, which account for potential endogeneity issues, indicate that such labour market developments negatively affect the bargaining power of regular workers, weakening their capacity to appropriate rents; conversely, more advanced technologies help regular workers gain higher rents.