Which Employers Share Rents? A firm-level analysis for Japan

Author Name IKEUCHI Kenta (Senior Fellow (Policy Economist), RIETI) / FUKAO Kyoji (Faculty Fellow, RIETI) / Cristiano PERUGINI (University of Perugia and IZA) / Fabrizio POMPEI (University of Perugia)
Creation Date/NO. July 2023 23-E-048
Research Project East Asian Industrial Productivity
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The aim of the paper is to contribute to the debate on wage inequality in Japan by looking at the role of rent-sharing. The existing knowledge on rent-sharing drivers and asymmetries in Japan is very limited and we contribute to this research field by exploring the heterogeneity in rent-sharing associated with employers’ characteristics. Namely, we first explore differences in rent-sharing associated with a set of structural and workforce characteristics (firm size, age, share of managers, share of college workers) and with internationalisation processes (exports and FDI). We then focus our attention on the heterogeneity in rent-sharing between firms with high/low intensity of investments in intangible assets and digital technologies.

The empirical analysis is based on employer-employee matched data obtained by combining the Basic Survey of Japanese Business Structure and Activities (BSJBSA) and the Basic Survey on Wage Structure (BSWS). The matching allows for the assembly of a large longitudinal firm-level dataset for the period 2005-2018 and for taking advantage of the many features of panel econometric techniques. The empirical methods used (IV models, split sample analysis) allow us to simultaneously shed light on a variety of relevant factors and address the many identification challenges related to endogeneity/reverse causality for key relationships.

Forthcoming: Ikeuchi, Kenta, Kyoji Fukao, and Cristiano Perugini. "Which employers pay a higher college wage premium?" International Journal of Manpower.