Wage curve in dual labor markets: cross-sectional evidence from Japan

Abstract

We find that the wage-unemployment relationship in Japan depends on the degree of labor market duality. The unemployment elasticity of wages is negative for the group with a lower degree of duality and, therefore, the Japanese wage curve holds for that group. However, the unemployment elasticity of wages is positive for the group with a higher degree of duality. This result is also valid as explained by the theory of compensating differentials. Therefore, the existence of dual labor market can affect the wage-unemployment relationship in developed countries such as Japan.