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The Depressing Effect of Agricultural Institutions on the Prewar Japanese Economy

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Author Info
Fumio Hayashi
Edward C. Prescott

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Abstract

The question we address in this paper is why the Japanese miracle didn't take place until after World War II. For much of the pre-WWII period, Japan's real GNP per worker was not much more than a third of that of the U.S., with falling capital intensity. We argue that its major cause is a barrier that kept agricultural employment constant at about 14 million throughout the prewar period. In our two-sector neoclassical growth model, the barrier-induced sectoral mis-allocation of labor and a resulting disincentive for capital accumulation account well for the depressed output level. Were it not for the barrier, Japan's prewar GNP per worker would have been close to a half of the U.S. The labor barrier existed because, we argue, the prewar patriarchy, armed with paternalistic clauses in the prewar Civil Code, forced the son designated as heir to stay in agriculture.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12081.

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Date of creation: Mar 2006
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Handle: RePEc:nbr:nberwo:12081

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Find related papers by JEL classification:
E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
O1 - Economic Development, Technological Change, and Growth - - Economic Development
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
N3 - Economic History - - Labor and Consumers, Demography, Education, Income, and Wealth

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Hayami, Yujiro & Ogasawara, Junichi, 1999. "Changes in the Sources of Modern Economic Growth: Japan Compared with the United States," Journal of the Japanese and International Economies, Elsevier, vol. 13(1), pages 1-21, March. [Downloadable!] (restricted)
  2. King, Robert G. & Levine, Ross & DEC, 1994. "Capital fundamentalism, economic development, and economic growth," Policy Research Working Paper Series 1285, The World Bank. [Downloadable!]
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  3. Caselli, Francesco, 2004. "Accounting for Cross-Country Income Differences," CEPR Discussion Papers 4703, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Laitner, John, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Blackwell Publishing, vol. 67(3), pages 545-61, July.
  5. Browning, Martin & Deaton, Angus & Irish, Margaret, 1985. "A Profitable Approach to Labor Supply and Commodity Demands over the Life-Cycle," Econometrica, Econometric Society, vol. 53(3), pages 503-43, May. [Downloadable!] (restricted)
  6. Balke, Nathan S & Gordon, Robert J, 1989. "The Estimation of Prewar Gross National Product: Methodology and New Evidence," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 38-92, February. [Downloadable!] (restricted)
  7. Douglas Gollin & Steven Parente & Richard Rogerson, 2003. "Structural Transformation and Cross-Country Income Differences," Levine's Bibliography 506439000000000259, UCLA Department of Economics. [Downloadable!]
  8. Echevarria, Cristina, 1997. "Changes in Sectoral Composition Associated with Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-52, May.
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  1. Aoki, Shuhei, 2008. "Inverse Ramsey Problem of the Resource Misallocation Effect on Aggregate Productivity," MPRA Paper 7930, University Library of Munich, Germany. [Downloadable!]
  2. Aoki, Shuhei, 2008. "Was the Barrier to Labor Mobility an Important Factor for the Prewar Japanese Stagnation?," MPRA Paper 8178, University Library of Munich, Germany. [Downloadable!]
  3. Peter Rangazas & Alex Mourmouras, 2008. "Fiscal Policy and Economic Development," IMF Working Papers 08/155, International Monetary Fund. [Downloadable!]
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