Controlling for Geographic Dispersion When Estimating the Japanese Phillips Curve

FRB of St. Louis Working Paper No. 2006-057A

29 Pages Posted: 25 Oct 2006

See all articles by Hiroshi Fujiki

Hiroshi Fujiki

Chuo University - Faculty of Commerce

Howard J. Wall

Lindenwood University - Center for Economics and the Environment

Date Written: October 2006

Abstract

This paper argues that estimation of the Phillips curve for Japan should take account of the geographic dispersion of labor-market conditions. We find evidence that the relationship between wage inflation and the unemployment rate is convex. With such convexity, wage inflation can occur when unemployment rates across regions become more disperse, even if the aggregate unemployment rate is unchanged. We show that controlling for the geographic dispersion of unemployment rates yields a flatter Phillips curve and a higher natural rate of unemployment.

Keywords: Japanese Phillips curve

JEL Classification: J6, E2

Suggested Citation

Fujiki, Hiroshi and Wall, Howard J., Controlling for Geographic Dispersion When Estimating the Japanese Phillips Curve (October 2006). FRB of St. Louis Working Paper No. 2006-057A, Available at SSRN: https://ssrn.com/abstract=939617 or http://dx.doi.org/10.2139/ssrn.939617

Hiroshi Fujiki

Chuo University - Faculty of Commerce ( email )

742-1, Higashinakano
Hacihoji
Tokyo, 192-0393
Japan

Howard J. Wall (Contact Author)

Lindenwood University - Center for Economics and the Environment ( email )

209 S. Kingshighway
St. Charles, MO 63301
United States

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