Sectoral Productivity and Economic Growth in Japan, 1970–98
Sectoral Productivity and Economic Growth in Japan, 1970–98
An Empirical Analysis Based on the JIP Database
Following the collapse of the so-called bubble economy, Japan's economy has entered a phase of unprecedentedly low growth. From the viewpoint of growth accounting, Japan's low economic growth in the 1990s can be explained by three factors: a slowdown of the labor supply caused by structural changes (for example, population aging and reduced work weeks), a slowdown of total factor productivity (TFP) growth, and a lack of effective demand and deflation. This chapter presents a detailed empirical analysis of Japan's TFP growth by using the Japan Industrial Productivity Database. It addresses the following questions: After the quality of labor and the capacity utilization have been taken account of, how much of the slowdown of Japan's economic growth in the 1990s can be attributed to the decline in TFP growth? In what sectors is TFP growth particularly low? What structural factors seem to have contributed to recent changes in sectoral productivity growth? Regarding the manufacturing sector in the 1990s, the chapter identifies factors that seems to have contributed to the low level of TFP growth.
Keywords: Japan, economic growth, total factor productivity, manufacturing, growth accounting, Japan Industrial Productivity Database, labor, capacity utilization, sectoral productivity
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