The Balassa-Samuelson Effect and the Labor Market in Japan F1977-2008

Takao Fujii and Yoichi Matsubayashi
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Takao Fujii: Kobe University of Foreign Studies
Yoichi Matsubayashi: Graduate School of Economics, Kobe University

No 1626, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: This study examines the BalassaSamuelson effect based on the real exchange rate by sectors in Japan and the United States. Although it is theoretically assumed that the effect holds under identical wages between tradable and non- tradable sectors, few empirical studies verify the validity of this assumption. We attempt to investigate the feasibility of the Balassa-Samuelson effect by focusing on Japanese labour market dynamics using a panel threshold model. The empirical results show that the effect may not have held since the end of the 1990s, given the wage discrepancy between tradable and non-tradable sectors, and that structural changes have been driven by the machinery sectors such as electricity and general machinery.

Pages: 26 pages
Date: 2016-09
New Economics Papers: this item is included in nep-opm and nep-sog
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