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Saturday, October 07, 2006

Changes in Income Concentration in Japan Compared to the U.S.

Why hasn't wage income inequality increased in Japan since 1970 as it has in the U.S.? This paper by Moriguchi and Saez says that "corporate governance and union structure are important determinants of wage income inequality" differences between the two countries:

The Evolution of Income Concentration in Japan, 1886-2002: Evidence from Income Tax Statistics, by Chiaki Moriguchi, Emmanuel Saez, NBER WP 12558, October 2006 [alternate link]: Abstract This paper studies the evolution of income concentration in Japan from 1886 to 2002 by constructing long-run series of top income shares and top wage income shares, using income tax statistics. We find that (1) income concentration was extremely high throughout the pre-WWII period during which the nation underwent rapid industrialization; (2) a drastic de-concentration of income at the top took place in 1938-1945; (3) income concentration has remained low throughout the post-WWII period despite the high economic growth; and (4) top income composition in Japan has shifted dramatically from capital income to employment income over the course of the 20th century. ... In contrast to the sharp increase in wage income inequality observed in the United States since 1970, the top wage income shares in Japan have remained remarkably stable over the recent decades. We show that the change in technology or tax policies alone cannot account for the comparative experience of Japan and the United States. Instead we suggest that institutional factors such as corporate governance and union structure are important determinants of wage income inequality.


    Posted by on Saturday, October 7, 2006 at 12:21 AM in Economics, Income Distribution | Permalink  TrackBack (1)  Comments (8)


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