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Productivity and the Business Cycle in Japan -Evidence from Japanese Industry Data -

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  • Tsutomu Miyagawa
  • Yukie Sakuragawa
  • Miho Takizawa
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    Abstract

    Constructing thirty-seven industries database, we examines whether measured productivity in Japan is procyclical and investigates the sources of that procyclicality using the production function approach employed by Hall (1990) and Basu and Fernald (1995). At the aggregate level, the measured Solow residual shows procyclicality. Large numbers of industries show constant returns to scale. No significant evidence for the presence of thick-market externalities is found. Our results also hold when we consider labor hoarding, part-time employment, and the adjustment cost of investment. The results suggest policies to revitalize the Japanese economy should concentrate on promoting productivity growth.

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    File URL: http://www.rieti.go.jp/jp/publications/dp/05e022.pdf
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    Bibliographic Info

    Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 05022.

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    Length: 40 pages
    Date of creation: Jul 2005
    Date of revision:
    Handle: RePEc:eti:dpaper:05022

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    1. Nakajima, Tomoyuki, 2005. "A business cycle model with variable capacity utilization and demand disturbances," European Economic Review, Elsevier, vol. 49(5), pages 1331-1360, July.
    2. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1993. "Labor Hoarding and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 245-73, April.
    3. Susanto Basu & John Fernald & Miles Kimball, 2004. "Are Technology Improvements Contractionary?," NBER Working Papers 10592, National Bureau of Economic Research, Inc.
    4. Kyoji Fukao & Hyeog Ug Kwon, 2004. "Why Did Japan's TFP Growth Slow Down in the Lost Decade?: An Empirical Analysis Based on Firm-Level Data of Manufacturing Firms," Hi-Stat Discussion Paper Series d04-50, Institute of Economic Research, Hitotsubashi University.
    5. Burnside, Craig, 1996. "Production function regressions, returns to scale, and externalities," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 177-201, April.
    6. Harald Uhlig & Lars Ljungqvist, 2000. "Tax Policy and Aggregate Demand Management under Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 90(3), pages 356-366, June.
    7. Abe, Naohito, 2002. "The Multi-Sector Business Cycle Model and Aggregate Shocks: An Empirical Analysis," Discussion Paper 117, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    8. Tom Krebs, 2003. "Growth and Welfare Effects of Business Cycles in Economies with Idiosyncratic Human Capital Risk," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(4), pages 846-868, October.
    9. Vecchi, Michela, 2000. "Increasing Returns, Labour Utilization and Externalities: Procyclical Productivity in the United States and Japan," Economica, London School of Economics and Political Science, vol. 67(266), pages 229-44, May.
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    Cited by:
    1. Masayuki Morikawa, 2011. "Economies of Density and Productivity in Service Industries: An Analysis of Personal Service Industries Based on Establishment-Level Data," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 179-192, February.

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