Full text: Price Takers' Plenty in a Model of Pure Capitalism.

~s-x / 
Japan's excellent record, in terms of high employment, moderate 
inflation and fast growth, has caused manj/- of us to study- .. 
and advocate 3the Japanese system of -wage payments; but to 
Martin Weitzman goes the credit for having analyzed it. 
The Japanese system of wage payments is said to have been the 
traditional Chinese system and was taken over by Japan, as well 
as by Taiwan and South Korea, only after the second World War. 
It splits the annual wage into two parts, the larger of which 
is paid in the form of fixed monthly payments and the smaller 
in the form of two semi-annual bonus payments whose amount is 
variable and varies more or less in proportion with the firm’s 
gross revenue or gross profit. Averaged over good and bad years, 
the two parts are in the approximate relation of two thirds to 
one third in Japan, of 85 to 15 per cent in both Taiwan and 
South Korea. 
People are believed to spend the monthlj 7- payments and save the 
bonuses; and Japanese economists attribute the country’s very 
high personal saving rate and fast growth largely to that factor. 
Another, oft- 
ntioned advantage of the system 
is that it imparts 
a downward flexibility to wages. In Japan, however, that Is 
doubtful, certainly in that simple-minded form, because Japanese 
trace unions are strong, militant, and bargain successfully for 
wages, which they interpret broadly, to include both the monthly
	        

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