Trade and the Labor Market: Effect on Wage Inequality in Japan

111 Pages·2017·5.676 MB·English

by  Kojiro Sakurai (auth.)

SPRINGER BRIEFS IN ECONOMICS
DEVELOPMENT BANK OF JAPAN RESEARCH SERIES
Kojiro Sakurai
Trade and the
Labor Market
Effect on Wage
Inequality in Japan
SpringerBriefs in Economics
Development Bank of Japan Research Series
Series editor
Akiyoshi Horiuchi
Editorial Board Members
Shinji Hatta
Kazumi Asako
Toshihiro Ihori
Eiji Ogawa
Masayuki Otaki
Masaharu Hanazaki
Masaaki Komiya
Hideo Oishi
Jun-ichi Nakamura
Kenji Tanaka
Thisseriesischaracterizedbythecloseacademiccohesionoffinancialeconomics,
environmental economics, and accounting, which are the three major fields of
researchoftheResearchInstituteofCapitalFormation(RICF)attheDevelopment
Bank of Japan (DBJ). Readers can acquaint themselves with how a financial
intermediary efficiently restructuring firms in financial distress, can contribute to
economic development.
Theaforementionedthreeresearchfieldsarecloselyconnectedwithoneanother
in the following ways. DBJ has already developed several corporation-rating
methods,includingtheenvironmentalratingbywhichDBJdecideswhetherornot
tomakeconcessionstothecandidatefirm.Toevaluatetherelevanceofthisrating,
research, which deploys not only financial economics but also environmental
economics, is necessary.
The accounting section intensively studies the structure of IFRS and Integrated
Reporting to predict their effects on Japanese corporate governance. Although the
disciplineofaccountingisusuallyisolatedfromfinancialeconomics,structuraland
reliablepredictionisneverachievedwithoutsufficientandintegratedknowledgein
both fields.
Finally,theenvironmentaleconomicssectionislinkedtotheaccountingsection
in the following manner. To establish green accounting (environmental account-
ing), it is indispensable to explore what the crucial factors for the preservation of
environment(e.g.emissioncontrol)are.RICFiswell-equippedtoaddresstheacute
necessityfordiscourseamongresearcherswhobelongtothesethreedifferentfields.
More information about this series at http://www.springer.com/series/13542
Kojiro Sakurai
Trade and the Labor Market
Effect on Wage Inequality in Japan
123
Kojiro Sakurai
Department ofEconomics
SenshuUniversity
Kanagawa
Japan
and
Research Institute of Capital Formation
Development Bankof Japan
Tokyo
Japan
ISSN 2191-5504 ISSN 2191-5512 (electronic)
SpringerBriefs inEconomics
ISSN 2367-0967 ISSN 2367-0975 (electronic)
Development Bankof JapanResearch Series
ISBN978-981-10-5992-6 ISBN978-981-10-5993-3 (eBook)
DOI 10.1007/978-981-10-5993-3
LibraryofCongressControlNumber:2017947765
©DevelopmentBankofJapan2017
Thisworkissubjecttocopyright.AllrightsarereservedbythePublisher,whetherthewholeorpart
of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations,
recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission
orinformationstorageandretrieval,electronicadaptation,computersoftware,orbysimilarordissimilar
methodologynowknownorhereafterdeveloped.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this
publicationdoesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexemptfrom
therelevantprotectivelawsandregulationsandthereforefreeforgeneraluse.
The publisher, the authors and the editors are safe to assume that the advice and information in this
book are believed to be true and accurate at the date of publication. Neither the publisher nor the
authorsortheeditorsgiveawarranty,expressorimplied,withrespecttothematerialcontainedhereinor
for any errors or omissions that may have been made. The publisher remains neutral with regard to
jurisdictionalclaimsinpublishedmapsandinstitutionalaffiliations.
Printedonacid-freepaper
ThisSpringerimprintispublishedbySpringerNature
TheregisteredcompanyisSpringerNatureSingaporePteLtd.
Theregisteredcompanyaddressis:152BeachRoad,#21-01/04GatewayEast,Singapore189721,Singapore
Acknowledgements
I would like to thank the participants who attended the seminar conducted by the
Research Institute of Capital Formation of the Development Bank of Japan.
Needless to say, I am responsible for all the remaining errors. Any opinions,
findings, or conclusions expressed in this book are those of the author and do not
reflect the views of the Development Bank of Japan.
v
Contents
1 Introduction.... .... .... ..... .... .... .... .... .... ..... .... 1
1.1 Motivation . .... .... ..... .... .... .... .... .... ..... .... 1
1.2 Objective of the Book ..... .... .... .... .... .... ..... .... 2
1.3 Related Studies in Japan.... .... .... .... .... .... ..... .... 3
1.4 Outline of the Book .. ..... .... .... .... .... .... ..... .... 3
References.. .... .... .... ..... .... .... .... .... .... ..... .... 4
2 Basic Facts. .... .... .... ..... .... .... .... .... .... ..... .... 7
2.1 Wage Inequality Trends in Japanese Manufacturing... ..... .... 7
2.1.1 Wage Inequality by Occupation .... .... .... ..... .... 8
2.1.2 Wage Inequality by Education . .... .... .... ..... .... 11
2.2 Supply-Demand Framework. .... .... .... .... .... ..... .... 13
2.3 Recent Changes in Japan’s Trade Structure . .... .... ..... .... 16
References.. .... .... .... ..... .... .... .... .... .... ..... .... 23
3 Effect of Trade on Employment. .... .... .... .... .... ..... .... 25
3.1 The Model . .... .... ..... .... .... .... .... .... ..... .... 25
3.2 Estimation Results ... ..... .... .... .... .... .... ..... .... 27
3.2.1 Changes in Export and Import Ratios.... .... ..... .... 28
3.2.2 Estimation Results... .... .... .... .... .... ..... .... 32
3.3 Non-neutral Effect of Trade on Employment .... .... ..... .... 36
References.. .... .... .... ..... .... .... .... .... .... ..... .... 75
4 Effect of Trade on Wages. ..... .... .... .... .... .... ..... .... 77
4.1 Objective .. .... .... ..... .... .... .... .... .... ..... .... 77
4.2 The Model . .... .... ..... .... .... .... .... .... ..... .... 78
4.3 Estimation Results ... ..... .... .... .... .... .... ..... .... 80
4.3.1 Data and Estimation Method... .... .... .... ..... .... 80
4.3.2 Change in Factor Content of Trade.. .... .... ..... .... 82
vii
viii Contents
4.4 Effect of Factor Content of Trade on Relative Wages . ..... .... 89
4.4.1 Effect on Relative Wages of Nonproduction Workers. .... 89
4.4.2 Effect on Relative Wages of College Graduates
to High School Graduates. .... .... .... .... ..... .... 90
References.. .... .... .... ..... .... .... .... .... .... ..... .... 101
5 Concluding Remarks. .... ..... .... .... .... .... .... ..... .... 103
5.1 Summary of the Study ..... .... .... .... .... .... ..... .... 103
5.2 Remaining Issues .... ..... .... .... .... .... .... ..... .... 105
References.. .... .... .... ..... .... .... .... .... .... ..... .... 106
About the Author
Kojiro Sakurai is a professor of economics at Senshu University and visiting
scholaroftheResearchInstituteofCapitalFormation,DevelopmentBankofJapan.
His main areas of research are labor economics, international economics, and
Japanese economy. Born in 1956, Prof. Sakurai received a Bachelor’s degree in
economics from Hitotsubashi University in 1980, a Master’s degree in economics
from Yale University in 1984, and a Doctor’s degree in economics from
Hitotsubashi University in 2008. He was appointed professor of economics at
Senshu University in 2007, after working for the Research Institute of Capital
Formation, DBJ, as chief economist.
ix
Chapter 1
Introduction
Abstract WideningwageinequalityintheUSandotherdevelopedcountriesinthe
West has been the focus of academic debates since the 1990s among economists,
especially in the field of labor economics and international economics. Studies to
date seem to have narrowed down the causes to two major factors: technological
change and globalization. Since these factors are generally witnessed in the
developedcountries,theymusthavesomepotentialimpactonJapan.Theobjective
of this book is to investigate how and to what extent international trade widens
wageinequalityintheJapanesemanufacturinglabormarket,boththeoreticallyand
empirically. Specifically, the book estimates the effect of trade between 1995 and
2005 on the relative wages of skilled to unskilled labor, represented by nonpro-
duction to production workers and college graduates to high school graduates, by
calculating the factor content of trade of 55 or 20 manufacturing industries. The
estimation reveals that trade was partly responsible for the widening wage
inequality in the Japanese manufacturing labor market, although the effect of the
trade was not dominant.
(cid:1) (cid:1) (cid:1) (cid:1)
Keywords Wageinequality Globalization Effectoftrade HOSmodel Factor
content of trade
1.1 Motivation
Sincethelate1980s,theUSandotheradvancedindustrialcountriesexperiencedan
increasing gap in income inequality between skilled and unskilled labor. A lot of
studies so far indicate that two major factors on the demand side of the economy
have widened income inequality. The first factor is skill-biased technological
change (SBTC) induced by information technology (IT). This factor expands
income inequality by increasing the marginal product of skilled labor. Studies
supporting this hypothesis include Berman et al. (1994, 1998), Autor et al. (1998,
2008).1 The second factor is globalization, such as increased trade with low-wage
1Autoretal.(2003,2008)stresspolarizationinducedbyIT.
©DevelopmentBankofJapan2017 1
K.Sakurai,TradeandtheLaborMarket,DevelopmentBank
ofJapanResearchSeries,DOI10.1007/978-981-10-5993-3_1