Industrial Policy, Innovation Policy, and Japanese Competitiveness
AbstractJapan faces significant challenges in encouraging innovation and entrepreneurship. Attempts to formally model past industrial policy interventions uniformly uncover little, if any, positive impact on productivity, growth, or welfare. The evidence indicates that most resource flows went to large, politically influential “backward” sectors, suggesting that political economy considerations may be central to the apparent ineffectiveness of Japanese industrial policy. Rather than traditional industrial or science and technology policy, financial and labor market reforms appear more promising. As a group, Japan’s industrial firms are competitive relative to their foreign counterparts. Japan falls behind in the heavily regulated service sector. The problems are due less to a lack of industrial policy than to an excess of regulation. Japan may have more to gain through restructuring the lagging service sector than by expending resources in pursuit of marginal gains in the industrial sector.
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Bibliographic InfoPaper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP07-4.
Date of creation: May 2007
Date of revision:
Japan; industrial policy; innovation policy;
Find related papers by JEL classification:
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
- L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-11 (All new papers)
- NEP-ENT-2007-06-11 (Entrepreneurship)
- NEP-INO-2007-06-11 (Innovation)
- NEP-REG-2007-06-11 (Regulation)
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