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Why Do Real Wages Stagnate in Japan and Korea?

Author

Listed:
  • Hyunbae Chun

    (Sogang University Department of Economics)

  • Kyoji Fukao

    (Hitotsubashi University Institute of Economic Research Research Institute of Economy, Trade and Industry (RIETI) IDE-JETRO)

  • Hyeog Ug Kwon

    (Nihon University College of Economics RIETI)

  • Jungsoo Park

    (Sogang University Department of Economics)

Abstract

This study investigates the reasons behind the slowdown in real wages for Japan and Korea based on the aggregate and industry-level data for the respective countries. The findings suggest the following. First, both at the aggregate and industry level, there is a significant slowdown in both countries in the post-1995 period regarding labor productivity, which explains the overall slowdown in real wages. Second, the main reason for the gap between the growths in real wages and labor productivity is found to be the changes in the labor's terms of trade, which is defined as the consumer price index to GDP deflator ratio. Thus, the wage–labor productivity gap is not systematically connected to changes in labor income shares. Finally, the fall in the labor's terms of trade may be potentially related to an emphasis on exports and strong technological upgrading toward higher productivity growth products in both countries’ economic development.

Suggested Citation

  • Hyunbae Chun & Kyoji Fukao & Hyeog Ug Kwon & Jungsoo Park, 2024. "Why Do Real Wages Stagnate in Japan and Korea?," Asian Economic Papers, MIT Press, vol. 23(1), pages 116-139, Winter/Sp.
    • Handle: RePEc:tpr:asiaec:v:23:y:2024:i:1:p:116-139
    DOI: 10.1162/asep_a_00882
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    Cited by:

    1. Kovács, Olivér, 2022. "Inkluzív kormányzás az ipar 4.0 korában - Japán példája [Inclusive governance in the age of Industry 4.0 - The example of Japan]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 255-277.

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