The first is the Miyazawa-Shinohara capital concentration hypothesis, which attributes wage differentials to differences in average productivity, which are in turn explained by differentials in capital intensity due to the imperfection of capital markets (Odaka, 1967 p.58). This hypothesis suggests that larger firms were able to obtain bank loans with relative ease compared to smaller firms. Furthermore, large firms incur a lower cost of capital than smaller firms: thereafter with adequate financial capacity it was possible for large firms to introduce capital-intensive production methods, thus leading to higher levels of labor productivity. However, this hypothesis required the assumption that large firms draw from a different labor market than small firms to explain persistent wage differentials (Minami, 1994