#89-DOF-3 "Synchronized Wage Determination and Macroeconomic 
           Performance in Japan" 
          (John B. Tayior, January 1989.)

A WHOLE SENTENCE

ABSTRACT

    The purpose of the research which I will discuss is to assess the 
role of the Shunto in achieving wage flexibility and thereby improving
macroeconomic performance in Japan.
    My previous research (Taylor (1988)) shows that money wages are 
considerably more flexible in Japan than in the U.S. or than in 
European countries. This fact along with a monetary policy that 
responds promtly to inflation is one explanation for the more stable 
macroeconomic performance in Japan in the last 15 years. An important 
question is whether the greater flexibility is due to the Shunto 
system, in which many workers have their wages adjusted in the spring 
or early summer of each year, or to the bonus system, in which a large
component of the wage is paid in the form of an apparantly flexible 
bonus .
    The research attempts of get at this distinction by estimating 
empirical wage equations for Japan, the U.S. , and other countries in 
which the degree of synchronization is a factor. Using quarterly wage 
data for Japan and the other G-7 countries (Canada, France, Germany, 
Italy, the United Kingdom, and the United States) wage equations are 
estimated over the period form 1972 through 1986. By comparing these 
estimated equations it is possible to determine the importance of the 
Shunto in Japan. The results indicate that the Shunto system does 
significantly affect the behavior of nominal wages in Japan. 
Quantitative estimates of the effects are provided. Taylor , John B . 
(1988) , "Differences in Economic Fluctuations in Japan and the U.S. :
The Role of Nominal Rigidities , " Journal of the Japanese and 
International Economies , forthcoming.