Why has the Unemployment Rate Been so Low in Japan? An Explanation by Two‐Part Wage Bargaining

Shigeru Wakita

The Japanese Economic Review, 2001, vol. 52, issue 1, 116-133

Abstract: The Japanese wage payment system is considered from a perspective of two‐part tariff pricing. Using the “amusement park” analogy, Shunto wages can be regarded as an “entrance fee”, whereas bonuses are a “variable charge”. Empirical investigation showed that a qualitative difference exists between these two types of wage: Shunto sets the coordinated wage rate by focusing on the whole labour market condition, while bonuses respond to idiosyncratic shock. Based on the standard prediction of two‐part wage tariff pricing, such a unique combination is the ultimate source of Japan's low unemployment. JEL Classification Number: J51.

Date: 2001
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