Price Markups and Wage Setting Behavior of Japanese Firms

Kosuke Aoki, Yoshihiko Hogen and Kosuke Takatomi
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Kosuke Aoki: University of Tokyo
Yoshihiko Hogen: Bank of Japan
Kosuke Takatomi: Bank of Japan

No 23-E-5, Bank of Japan Working Paper Series from 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.

Keywords: Price markup; Wage markdown; Monopsony; Labor share (search for similar items in EconPapers)
JEL-codes: E24 E31 J30 J42 L12 (search for similar items in EconPapers)
Date: 2023-04-21
New Economics Papers: this item is included in nep-com, nep-lma and nep-mon
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Citations: View citations in EconPapers (3)

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