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A Model of Technology Transfer in Japan's Rapid Economic Growth Period

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  • Aoki, Shuhei

Abstract

Why did the Japanese economy stagnate beforeWorldWar II, how did it achieve rapid economic growth after the war, and why did it stagnate again after the 1970s? To answer these questions, I developed a two-country trade model with technology transfer, where firms in a developed country (the U.S.) transfer technology to the competitors in a developing country (Japan) if it is profitable to do so and where the technology transfer is the engine of economic growth. In this model, among multiple equilibria, the equilibrium with low labor cost in Japan was chosen during the rapid growth period. Then, the firms in the developed country transferred technology to the firms in the developing country, resulting in rapid growth. However, during the other periods, the equilibrium with high labor cost in Japan was chosen, which caused stagnation. The model is quantitatively consistent with the per capita GDP relative to the U.S., the purchasing power parity-exchange rate ratio, and to some degree, the swings in labor share of postwar Japan.

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Bibliographic Info

Paper provided by Institute of Innovation Research, Hitotsubashi University in its series IIR Working Paper with number 11-05.

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Length: 51 p.
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:hit:iirwps:11-05

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Keywords: Japan's rapid economic growth; Licensing; Technology transfer; Undervaluation of yen;

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