Changing Unchanged Inequality:
Higher Education, Youth Population, and
Japan’s Seniority Wages

Ken Yamada
Daiji Kawaguchi

September 2012
(2nd Revised: July 2013)


Wage inequality declined in the 1990s for full-time male workers in Japan, while it in- creased in the 2000s. We find that a decreased return to firm-specific human capital, which has been neglected in previous empirical analyses of inequality, is a key factor preventing a rise in wage inequality during the prolonged period of economic stagnation, known as Japan's lost decades. A significant fraction of the increase in wage inequality in the 2000s is a mechanical change arising from an increased share of educated and experienced workers.

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