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Suggested citation:
Fukao, K. and C. Perugini. 2018. Institutions, Deindustrialization, and Functional Income
Distribution in Japan. ADBI Working Paper 895. Tokyo: Asian Development Bank Institute.
Available: https://www.adb/publications/institutions-deindustrialization-functional-income-
distribution-japan
Please contact the authors for information about this paper.
Email: cristiano.perugini@unipg.it
Kyoji Fukao is a professor of economics at the Institute of Economic Research of
Hitotsubashi University. Cristiano Perugini is an associate professor at the University of
Perugia.
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2018 Asian Development Bank Institute
ADBI Working Paper 895 Fukao and Perugini
Abstract
We investigate the long-term drivers of the labor share in Japan using data from the
Japanese Industrial Productivity database from 1970 to 2012. The descriptive and
econometric results indicate that the decline in the labor share observed in Japan during the
period of analysis was highly concentrated in the low-knowledge-intensity sectors, the
employment share of which has increased remarkably. These sectors also experienced a
strong increase in non-regular workers, who constitute a secondary segment of the labor
market in Japan, characterized by low wages and very limited union coverage. The low level
of protection of this group of workers and the increase in market power concentration have
probably contributed to reducing the bargaining power of labor vis-à-vis employers and,
consequently, the labor share.
Keywords: labor share, non-regular work, markup, Japan
JEL Classification: E25, J30, L11, O14
ADBI Working Paper 895 Fukao and Perugini
Contents
1. INTRODUCTION ......... 1
2. DATA AND PRELIMINARY EMPIRICS ........... 2
3. EMPIRICAL MODEL AND ECONOMETRIC METHODS ........ 4
4. RESULTS ........ 6
5. FINAL REMARKS AND POLICY ADVICE .... 10
REFERENCES ......... 11
APPENDIX A: INDUSTRY AGGREGATES .. 15