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Price Markups and Wage Setting Behavior of Japanese Firms

Author

Listed:
  • Kosuke Aoki

    (University of Tokyo)

  • Yoshihiko Hogen

    (Bank of Japan)

  • Kosuke Takatomi

    (Bank of Japan)

Abstract

We estimate price markups and wage markdowns of Japanese firms using a newly constructed dataset of individual firms' financial statements -- which covers about 80 percent of the Economic Census in terms of sales size. We find that Japanese firms have secured profits by increasing markdowns amid a declining trend in markups, which has ultimately led to the stabilization of the labor share in the long run. We also find that this trend has been more pronounced among small firms in the non-manufacturing sector. Comparing our results with the U.S., (1) markdowns have increased in both Japan and the U.S., however, (2) the decline in markups in Japan is in stark contrast to the U.S., where the rise of the so-called superstar firms with strong market power has led to expansions of markups for the whole corporate sector.

Suggested Citation

  • Kosuke Aoki & Yoshihiko Hogen & Kosuke Takatomi, 2023. "Price Markups and Wage Setting Behavior of Japanese Firms," Bank of Japan Working Paper Series 23-E-5, Bank of Japan.
    • Handle: RePEc:boj:bojwps:wp23e05
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    References listed on IDEAS

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    Cited by:

    1. KIKUCHI Shinnosuke, 2024. "Trends in National and Local Market Concentration in Japan: 1980-2020," Discussion papers 24049, Research Institute of Economy, Trade and Industry (RIETI).
    2. Ichiro Fukunaga & Kakuho Furukawa & Shunsuke Haba & Yoshihiko Hogen & Yosuke Kido & Tomohiro Okubo & Kotaro Suita & Kosuke Takatomi, 2023. "Wage Developments in Japan: Four Key Issues for the Post-COVID-19 Wage Growth," Bank of Japan Working Paper Series 23-E-4, Bank of Japan.

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    More about this item

    Keywords

    Price markup; Wage markdown; Monopsony; Labor share;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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