Wage Determinations in Japanese Manufacturing Industries-Structural Change and Wage Differentials

Abstract

A NUMBER OF ATTEMPTS have focused on how wage rates (or wage earnings) are distributed among workers who have certain demographic or social characteristics. The analysis in this paper is, however, considerably different from existing literature. First, since the study covers more than ten years (namely, 1958-1970), careful attention is paid to structural change in the influence of certain variables accounting for wage differentials. The data are from Japan. In view of the fact that Japan has experienced remarkably high economic growth rate in this period, the time-series study on wage differentials is expected to give useful insight into the change in behavior of the labor market in a dynamic economy. Also, it is noted that Japan was changing from a labor surplus economy to one with a labor shortage in this period. (For example, see Minami [7].) Second, several variables which have not been investigated in the literature will be used to explain wage differentials, the most important being experience. Third, considerable effort is given to the effect of interactions among certain variables. Fourth, the analysis of variance method is used to isolate the quantitative effect of certain variables on wages. In other words, the purpose of the analysis of variance is to determine the effects of certain variables on wages, and discover which factors are important for explaining wage differentials. The method is not so innovational. There are several applications in economics; see Barger [1], Blumental [3], Hall [4] and others. In Section 1, the variables and the data will be discussed. In Section 2, estimation problems will be considered. Section 3 presents and examines the empirical results.