Dual Labor Market and the "Phillips Curve Puzzle"

25 Pages Posted: 28 Jun 2021

See all articles by Hideaki Aoyama

Hideaki Aoyama

RIKEN iTHEMS; Research Institute for Economy, Industry and Trade (RIETI)

Corrado Di Guilmi

University of Technology Sydney (UTS) - UTS Business School

Yoshi Fujiwara

University of Hyogo - Graduate School of Information Science

Hiroshi Yoshikawa

Rissho University

Date Written: June 16, 2021

Abstract

Low inflation was once a welcome to both policy makers and the public. However, Japan’s experience during the 1990’s changed the consensus view on price of economists and central banks around the world. Facing deflation and zero interest bound at the same time, Bank of Japan had difficulty in conducting effective monetary policy. It made Japan’s stagnation unusually prolonged. Too low inflation which annoys central banks today is translated into the “Phillips curve puzzle”. In the US and Japan, in the course of recovery from the Great Recession after the 2008 global financial crisis, the unemployment rate had steadily declined to the level which was commonly regarded as lower than the natural rate or NAIRU. And yet, inflation stayed low. In this paper, we consider a minimal model of dual labor market to jointly investigate how blue the different factors.

Keywords: Phillips curve, bargaining power, secondary workers

JEL Classification: C60, E31

Suggested Citation

Aoyama, Hideaki and Di Guilmi, Corrado and Fujiwara, Yoshi and Yoshikawa, Hiroshi, Dual Labor Market and the "Phillips Curve Puzzle" (June 16, 2021). CAMA Working Paper No. 49/2021, Available at SSRN: https://ssrn.com/abstract=3867854 or http://dx.doi.org/10.2139/ssrn.3867854

Hideaki Aoyama

RIKEN iTHEMS ( email )

Wako, Saitama 351-0198
Japan
+81-9019011954 (Phone)

Research Institute for Economy, Industry and Trade (RIETI) ( email )

1-3-1 Kasumigaseki
Chiyoda-ku
Tokyo 100-8901
Japan

Corrado Di Guilmi (Contact Author)

University of Technology Sydney (UTS) - UTS Business School ( email )

Sydney
Australia

Yoshi Fujiwara

University of Hyogo - Graduate School of Information Science ( email )

7-1-28 Minato-jima, Minami-machi
Chuo-ku
Kobe, Hyogo 650-0047
Japan

Hiroshi Yoshikawa

Rissho University ( email )

4-2-16, Osaki, Shinagawa-ku
Tokyo 141-8802
Japan
+81334927529 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
21
Abstract Views
187
PlumX Metrics