An Empirical Analysis of the Wage-Tenure Profile Using Firm-Level Panel Data in Japan

It is recognized, mainly from Japanese aggregate data, that the wage-tenure profile is affected by conditions in external labor markets, by productivity, and by population aging. We estimate the effects of these factors on the wage-tenure profile using matched employer-employee panel data at the firm level for the period since the bursting of the bubble economy in Japan. The results show that ceteris paribus, the steepness of the wagetenure profile is positively related to labor productivity, but negatively related to tightness of external labor markets and aging of employees. We also find that the wagetenure profile tended to flatten in firms that reduced employment.