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The Lost Decade in the Japanese Labor Market : Labor’s share and Okun’s Law

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  • Shigeru Wakita

    (PRI)

Abstract

The purpose of this study is to reexamine two empirical regularities in the Japanese labor market : the constant labor share and Okun's law. The former law relates to the price of labor in the labor market while the latter is a quantity law; they represent suitable benchmarks for judging the condition of the labor market. Although there are more elaborate statistical techniques, these laws are frequently used because they can clarify the macroeconomic situation at a glance. First, a constant labor share is implied in theory by the CobbDouglas production function. Thus, labors share should be based on the production function. Labors share based on income has only been rising because of massive depreciation. Secondly, there have been several structural breaks in Okun's law since the bubble collapsed, and the potential growth rate has fallen.

Suggested Citation

  • Shigeru Wakita, 2006. "The Lost Decade in the Japanese Labor Market : Labor’s share and Okun’s Law," Labor Economics Working Papers 22317, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:laborw:22317
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    References listed on IDEAS

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    Cited by:

    1. Kyoji Fukao & Cristiano Perugini, 2021. "The Long‐Run Dynamics of the Labor Share in Japan," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(2), pages 445-480, June.
    2. Agnese, Pablo, 2009. "Japan and her dealings with offshoring: An empirical analysis with aggregate data," IESE Research Papers D/793, IESE Business School.
    3. Pablo Agnese, 2013. "Offshoring and productivity revisited: A Time-Series Analysis [Zur Debatte um Offshoring und Produktivität: Eine Zeitreihenanalyse]," Duesseldorf Working Papers in Applied Management and Economics 23, Duesseldorf University of Applied Sciences.
    4. Agnese, Pablo, 2013. "Offshoring and Productivity Revisited: A Time-Series Analysis," IZA Discussion Papers 7323, Institute for the Study of Labor (IZA).
    5. Gerald A. Epstein & Tom Schlesinger & Matías Vernengo (ed.), 2014. "Banking, Monetary Policy and the Political Economy of Financial Regulation," Books, Edward Elgar Publishing, number 13460.
    6. Agnese, Pablo, 2009. "Employment effects of offshoring. An application to Japanese industries, 1980-2005," MPRA Paper 16506, University Library of Munich, Germany.

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    More about this item

    Keywords

    labor share; Okun's law;

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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