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Does government promote or hinder capital accumulation? Evidence from Japan' s high-growth era

Author

Listed:
  • Mariko Hatase

    (Bank of Japan)

  • Yoichi Matsubayashi

    (Graduate School of Economics, Kobe University)

Abstract

Governments occasionally intervene in private sector economic activities to promote specific industries and enhance economic growth. During Japan's high-growth era, the government used various policy tools to intervene in private sector capital investments. We examine the effects of these policy tools on capital accumulation. We employ firm-level data sets, identify policy actions using historical records and find that they were applied intensively to specific sectors and firms and that government intervention partially affected those firms f capital investment decisions. For some industries, such as steel, chemicals and textiles, investment-promoting policy tools resulted in accelerating capital investments or relatively higher resource allocations of capital to labour. There were also cases in which policy actions aimed at curbing investments resulted in slower investments or lower allocations of capital to labour, but the effects were weak and small. Discouraging policy tools had contradictory effects on some industries and enhanced capital investments. The latter phenomenon was observed when the government attempted to control private sector capital investments based on the current share of production or production capacities.

Suggested Citation

  • Mariko Hatase & Yoichi Matsubayashi, 2016. "Does government promote or hinder capital accumulation? Evidence from Japan' s high-growth era," Discussion Papers 1602, Graduate School of Economics, Kobe University.
    • Handle: RePEc:koe:wpaper:1602
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    File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2016/1602.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    capital accumulation; industrial policy; capital distortion; high-growth era;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

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