the two parts before and after 1998. Using labor market factors on which the annual wage negotiations between management and labor (shunto) focus, such as the unemployment rate, as well as the inflation rate and firms' profits as explanatory variables, the analysis shows that whereas before 1998 fixed wages were sensitive to labor market indicators, from 1998 onward, labor hoarding within firms became an important factor. Meanwhile, with regard to bonuses, the analysis indicates that while before 1998, firms' profits were an important determinant, from 1998 onward bonuses also became susceptible to external labor market indicators, which had deteriorated, so that rent sharing with workers diminished. This can be regarded as the main reason for the stagnation in wages in recent years. The finding of the analysis, that estimation equations focusing on hourly productivity rather than labor market indicators such as unemployment are more explainable, suggest that macro indicators of wages should focus on hourly wages and not on wages per person.

Chapter 2, titled “Business Cycle and Wage Dispersion,” examines whether wage differentials in Japan are procyclical – that is, whether they increase during times of economic recovery – or whether, conversely, they are countercyclical and expand during periods of recession. Using the monthly data of the Monthly Labour Survey and the annual data of the Basic Survey on Wage Structure, both published by the Ministry of Health, Labour and Welfare, to calculate the ratio of regular workers’ wages to part-time workers’ wages, the authors find that the former data indicate that wage differentials are procyclical, while the latter suggest that they are countercyclical. However, because the Basic Survey on Wage Structure consists of annual data and therefore potentially suffers from aggregation bias, the authors take the results from Monthly Labour Survey and conclude that wage differentials in Japan are procyclical. Based on this, the authors construct a search and matching model with a two-sector labor market consisting of full-time and part-time workers, and then calibrate the model using Japanese labor market data. The model incorporates on-the-job search activity allowing part-time workers to move to the full-time job sector with a certain probability. The authors find that the model replicates the cyclical fluctuations in the wage differentials between full-time and part-time workers and that, during times of economic recovery, wage differentials increase, while they decrease during recessions.

Chapter 3, titled “Value Added Productivity and Intersectoral Labor Allocation,” examines to what extent labor is efficiently reallocated from sectors with declining demand to sectors with increasing demand. There are concerns in Japan that because many of the sectors facing a large increase in demand, such as social welfare services, are heavily regulated by the government and wages do not flexibly adjust across sectors, labor may not be efficiently reallocated to these sectors. To investigate this issue, the chapter focuses on the dynamics of prefecture- and occupation-level effective job-offers-to-applicants ratios. Specifically, the author develops a search model taking