An Empirical Analysis of Substitution and Complementarity of Gender Labor Demand of Enterprises in Japan, Korea, and China: With a Factor Decomposition of Gender Wage Differentials

Abstract

The purpose of this study is the effect of expansion of female labor demand on male labor demand for labor market reform to facilitate Japanese economic development. Firstly, the estimates using Hicks’ (1970) partial elasticity of complementarity and Allen’s (1938) partial elasticity of substitution revealed an increase in male labor demand when female labor demand increased in all three countries. The results were a relationship of complementarity in labor demand between male and female regular employees in the order of China, South Korea, Japan. However, a push factor or a pull factor is assumed to make up a complementarity relationship. Therefore secondly, the factor decomposition analysis of wage gap is used to investigate which factors are applicable. The gender wage gap consists of economic rationality and economic irrational discriminatory [Neumark (1988); Oaxaca and Ransom (1994)]. The gap was confirmed in all three countries. Although the actual gender average wage difference was small in China, “discriminatory preference theory” was suggested that there is underpayment of women in Japan and Korea. In Japan, as women have a high potential labor force participation rate, expansion of female labor demand seems promising as an economic policy, not least because of the declining population. Labor-related economic policies are needed, such as the creation of a fluid labor market in China, or the implementation of effective policies in Korea.