Wage Distribution in Japan: 1989-2003

Diverging economic inequality has become a common focus of economic de-bate in developed countries. In particular, the recent experience of Japan has started attracting international attention. We take advantage of a rich micro-level data set from the Basic Survey on Wage Structure (1989-2003) to perform an in-depth analysis of the change in the inequality and distrib-ution of the hourly wage. We observe that lower returns to education and years of tenure contribute to diminishing income disparity between groups for both sexes. A larger variance within a group contributes to the wage disparity for males, while an increased heterogeneity of workers ’ attributes contributes to the wage disparity for females. The Dinardo, Fortin, and Lemieux decomposition also confirms the basic findings from a parametric variance decomposition