Price Dynamics in Japan (1981-2001): A Structural Analysis of Mechanisms in the Goods and Labor Markets

Nicolas Canry (), Julien Fouquau and Sebastien Lechevalier

No a493, Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: This paper aims to provide an alternative framework to previous studies of deflation in Japan. We focus on the real dimension of the price dynamics and propose an imperfect competition model, which describes a rent economy, where the formation of prices can be separated into the markup (level of the rent in the goods market) and the unit labor cost (distribution of the rent in the labor market). We use a panel industry dataset to analyze the impact of institutional and structural factors on the heterogeneous price dynamics of 10 manufacturing sectors. Although the evolution of unit labor costs seems to be the driving force of price dynamics in the manufacturing industry, our structural analysis leads to consider the importance of the increasingly competitive environment, as captured by rising import penetration. Along with the decline of bargaining power of the workforce, this is at the origin of the deflationary pressures that characterized the Japanese economy during the Lost Decade.

Keywords: Deflation; Japanese Economy; Wage Bargaining; Markup; Deregulation; Panel Threshold Regression (search for similar items in EconPapers)
JEL-codes: C23 E31 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2007-03
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/13461/DP493.pdf

Related works:
Journal Article: Price Dynamics In Japan (1981-2001): A Structural Analysis Of Mechanisms In The Goods And Labor Markets (2010)
Working Paper: Price Dynamics in Japan (1981-2001): a Structural Analysis of Mechanisms in the Goods and Labor Markets (2010)
Working Paper: Price Dynamics in Japan (1981-2001): a Structural Analysis of Mechanisms in the Goods and Labor Markets (2010)
Working Paper: Price Dynamics in Japan (1981-2001): A StructuralAnalysis of Mechanisms in the Goods and LaborMarkets (2007)
Working Paper: Price Dynamics in Japan (1981-2001):A Structural Analysis of Mechanisms in the Goods and Labord Markets (2007)
Working Paper: Price Dynamics in Japan (1981-2001): A StructuralAnalysis of Mechanisms in the Goods and LaborMarkets (2007)
Working Paper: Price Dynamics in Japan (1981-2001):A Structural Analysis of Mechanisms in the Goods and Labord Markets (2007)
Working Paper: Price Dynamics in Japan (1981-2001): A Structural Analysis of Mechanisms in the Goods and Labor Markets (2007)
Working Paper: Price Dynamics in Japan (1981-2001): A Structural Analysis of Mechanisms in the Goods and Labor Markets (2007)
Working Paper: Price Dynamics in Japan (1981-2001): A Structural Analysis of Mechanisms in the Goods and Labor Markets (2007)
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