Table Of ContentLABOR MARKET ADJUSTMENTS
IN THE PACIFIC BASIN
LABOR MARKET ADJUSTMENTS
IN THE PACIFIC BASIN
edited by
Peter T. Chinloy and
Ernst W. Stromsdorfer
Kluwer-Nijhoff Publishing
a member of the Kluwer Academic Publishers Groups
Boston Dordrecht Lancaster
Distributors
forthe Untted States and Canada: Kluwer Academic Publishers,
101 Philip Drive, Norwell, MA02061 , USA
forthe UK and Ireland: Kluwer Academic Publishers, MTP Press
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for all other countries: Kluwer Academic Publishers Group, Distribution
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Library of Congrns Cataloging·I .... Publicatlon Data
Labor market adjustments in the Pacific basin.
Bibliography: p.
Includes index.
1. Labor supply-Pacific Coast (North America)
2. Labor supply-Japan. 3. Foreign trade and employment
Pacific Coast (North America) 4. Foreign trade and
employment-Japan. I. Chinloy, Peter T., 1950-
Ii. Stromadorfer, Ernst W., 1934-
HD5722.L33 1986 33.12'099 86-15350
ISBN-13:978-94-010-7958-7 e·ISBN-13:978-94-009-3251-7
DOl: 10,1007/978-94-009-3251-7
Copyright© 1987 by Kluwer-Nijhoff Publishing, Boston.
Softcover reprint of the hardcover 1st edition 1987
All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted in any form or by any means,
mechanical, photocopying, recording, or otherwise, wtthouttheprior
written permission olthe publisher, Kluwer-Nijhoff Publishing,
101 Philip Drive, Norwell, MA02061.
Contents
Contributing Authors and Participants vii
Acknowledgements ix
1
Introduction
PeterT. Chinloy and ErnstW. Stromsdorfer
Part I
Theoretical Framework: Institutions and the labor Market 11
2
A Comparison of Labor Market Equilibria Under Different Institutional 13
Organizations
Nicholas H. Kiefer
Part II
Observed Dislocation: International Comparisons 31
3
Wage Flexibility in the United States and Japan 33
Masanori Hashimoto and John Raisian
4
The Impact of International Trade Shocks on Wage Adjustments in Canada 61
Jean-Michel Cousineau
5
Japanese Redundancy: The Impact of Key Labor Market Institutions on the 79
Economic Flexibility of the Japanese Economy
Kazuo Koike
v
vi CONTENTS
6
The Impact of Mexican Migration on the United States and Mexican 103
Economies and Labor Markets
Juan Diez-Canedo Ruiz
Part III
Domestic and International Shocks: Effects on Employment and Wages 137
7
Wage and Employment Adjustments and the Efficiency Wage Hypothesis: 138
An Application to the Japanese Manufacturing Sector
Isao Ohashi
8
The Collective Impact of Sectoral Shocks on Aggregate 161
Employment Fluctuations
Joseph G. Altonji and John C. Ham
Part IV
Compensation of Displaced Workers
203
9
Job Security Versus Income Security 205
G.C. Archibald and Peter T. Chinloy
10
Compensating Displaced Workers - What, How Much, How? 243
Daniel S. Hamermesh, Joseph J. Cordes and Robert S. Goldfarb
Index 267
Contributing Authors and Participants
Joseph G. Altonji Ben Craig
Department of Economics Department of Economics
Columbia University Washington State University
New York, NY 10027 Pullman, WA 99164
Masahiko Aoki Juan Diez-Canedo Ruiz
Department of Economics Superente de Financiamento Externo
Stanford University Banco de Mexico
Stanford, CA 94305 Condo 6, 90 Piso
Cent. Deleg Cuauht., 06059
G.C.Archibald MEXICO, OF
Department of Economics
University of British Columbia Gregory M. Duncan
Vancouver, BC V6T 1W 5 Department of Economics
CANADA Washington State University
Pullman, WA99164
PeterT. Chinloy
Department of Economics Robert S. Goldfarb
University of Santa Clara Department of Economics
Santa Clara, CA 95053 The George Washington University
Washington, DC 20052
Joseph J. Cordes
Department of Economics JohnC.Ham
The George Washington University Department of Economics
Washington, DC 20052 University of Toronto
Toronto, Ontario M5S 1A 1
Jean-Michel Cousineau CANADA
School of Industrial Relations
University of Montreal Daniel S. Hamermesh
Montreal, Quebec H3C 3J7 Department of Economics
CANADA Michigan State University
East Lansing, MI48824
vii
viii
CONTRIBUTING AUTHORS AND PARTICIPANTS
Masanori Hashimoto IsaoOhashi
Department of Economics Department of Economics
Indiana University Nagoya University
Bloomington, IN 47402 Furo-cho, Chikusa-ku
Nagoya 464, JAPAN
Laurence R. Iannacone
Department of Economics Edgar Ortiz
University of Santa Clara Universidad Autonoma de Mexico
Santa Clara, CA 95053 Civdad Universitaria
Alvaro Obregon, 04510
Nicholas M. Kiefer MEXICO, DF
Department of Economics
Cornell University John Raisian
Ithaca, NY 14853 Unicorn Research Corporation
10801 National Boulevard
KazuoKoike Los Angeles, CA 90064
Institute of Economic Research
Kyoto University Susan Ranney
Yoshida-Honmachi, Sakyo-ku Department of Economics
Kyoto 606, JAPAN University of Washington
Seattle, WA98195
Duane E. Leigh
Department of Economics Jaime Serra-Puche
Washington State University EI Colegio de Mexico
Pullman, WA99164 Camino AI Ajusco 20
Codigo Postal 01000
Hajime Miyazaki 10740 MEXICO, DF
Department of Economics
Ohio State University ErnstW. Stromsdorfer
Columbus,OH43210 Department of Economics
Washington State University
Ronald Oaxaca Pullman, WA99164
Department of Economics
University of Arizona
Tuscon, AZ 85721
Acknowledgments
This project arose from initial discussions on how to examine the effects on
labor markets of rapid changes in exchange rates and the decline of
goods producing sectors in the economies of the United States and Canada.
Discussions with colleagues in Canada, the United States, Mexico, and
Japan suggested that there was extensive international interest in how labor
markets adjust to external shocks. This book is a product of that interest.
The intention throughout has been to include explicitly the institutions of
the labor market, as they are manifested in different societies. The Chapters
are all directed to the topic of international labor market adjustment, and
contain theoretical modelling, empirical work, and discussion of significant
labor market institutions.
We acknowledge the research support of the U. S. Department of Labor.
This support covered the researchers in the United States, Mexico, and
Japan. The researchers in Canada have been supported by the Social
Sciences and Humanities Research Council of Canada. Support for the
preparation of the manuscript has also been provided by a Presidential
Grant from the University of Santa Clara and from the College of Business
and Economics at Washington State University.
There are several individuals who have provided assistance. This is an
incomplete list, as justice cannot be done to all. Dr. William Barnes of the
U.S. Department of Labor has provided his personal interest and encour
agement. Daniel Hamermesh gave several valuable suggestions on the
design of this project. Joy Congdon and Laura Beach have made suggestions
on the logistical aspects of the project. The research library at the Massa
chusetts Institute of Technology has aided with information retrieval on
Mexico. The Word Processing Center of the Washington State University,
through Helen Stevens and her staff, produced the book in a most skillful
and timely way.
IX
LABOR MARKET ADJUSTMENTS
IN THE PACIFIC BASIN
1
INTRODUCTION
Peter T. Chinloy and Ernst W. Stromsdorfer
I. Background to Adjustments in Labor Markets
The book examines the process of adjustment in labor markets across
countries arising from external shocks and shifts in international competi
tiveness. The examination of specific countries and their data permits a
comparison of alternative institutions for compensating and redeploying
labor. Four countries are involved, whose labor markets are both competi
tive and complementary: Canada, Japan, Mexico, and the United States.
Both public labor market institutions, such as direct government com~
pensation of displaced workers and the effect of unemployment insurance,
and private market arrangements, such as em loyer-employee agreements
on layoffs, the work contract, and severance pay, are considered. Compara
tive examination across countries of labor market and related insitutions is
thus possible. The book has a common theme, namely the adjustment of
labor markets to exogenous shocks, particularly those externally induced.
The unifying focus in on workers whose specific skills in an industry or firm
render them relatively immobile.
Institutional arrangements in the labor market vary among countries. In
Canada and the United States, wages are relatively rigid in the short run, but
1
