Deferred Compensation: Evidence from Employer-Employee Matched Data from Japan

Kyoji Fukao, Ryo Kambayashi (), Daiji Kawaguchi, Hyeog Ug Kwon, YoungGak Kim () and Izumi Yokoyama ()

Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: Wage increases, along with job tenure, are one of the most robust empirical regularities found in labor economics. Several theories explain these empirical regularities, and such theories offer sharp empirical predictions for the relation between productivity-tenure and wage-tenure profiles. The human capital model, with cost and benefit sharing between workers and employers, predicts a steeper productivity-tenure profile than wage-tenure profile. The matching quality model predicts that the two profiles will overlap. Theories that involve the information asymmetry between employers and employees predict a steeper wage-tenure profile than productivity-tenure profile to induce workers' effort and enhance efficiency. This paper estimates the productivity-tenure profile and the wage-tenure profile by estimating the plant-level production function and the wage equation using employer-employee matched data from Japan. These estimations offer a comprehensive test for the relative applicability of the two theories on the wage-tenure profile. Estimation results indicate a steeper wage-tenure profile than productivity-tenure profile and point to the relative importance of the deferred wage payment contract.

Keywords: Wage; Productivity; Employer-Employee Matched Data; Japan (search for similar items in EconPapers)
JEL-codes: J24 J31 (search for similar items in EconPapers)
Date: 2006-10
New Economics Papers: this item is included in nep-bec, nep-lab and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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