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The Industry Origins of the US-Japan Productivity Gap

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  • Dale Jorgenson
  • Koji Nomura

Abstract

This paper presents a comparison of total factor productivity (TFP) levels between the US and Japan for the period 1960-2004 and allocates the gap to individual industries. We carefully distinguish the various concepts of purchasing power parity (PPP) and measure them within the framework of a US-Japan bilateral input-output table. We also measure industry-level PPPs for capital, labor, energy, and materials inputs and output for 42 industries common to the US and Japan, based on detailed estimates for 164 commodities, 33 assets, including land and inventories, and 1596 labor categories. The US-Japan productivity gap shrank during three decades of rapid Japanese economic growth, 1960-1990. The Japanese manufacturing sector achieved parity with its US counterpart by the end of the period. With the collapse of the Japanese economic bubble at the end of the 1980s, the US-Japan productivity gap reversed course and expanded to 79.5% by 2004. This can be attributed to rapid productivity growth in the IT-producing industries in the US during the late 1990s and the sharp acceleration of productivity growth in the IT-using industries in the US during 2000-2004. Wholesale and Retail Trade emerged as the largest contributor to this gap, accounting for 25.1% of the lower TFP of the Japanese economy.

Suggested Citation

  • Dale Jorgenson & Koji Nomura, 2007. "The Industry Origins of the US-Japan Productivity Gap," Economic Systems Research, Taylor & Francis Journals, vol. 19(3), pages 315-341.
    • Handle: RePEc:taf:ecsysr:v:19:y:2007:i:3:p:315-341
    DOI: 10.1080/09535310701572024
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    Citations

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    Cited by:

    1. Rod Tyers, 2012. "Japanese Economic Stagnation: Causes and Global Implications," The Economic Record, The Economic Society of Australia, vol. 88(283), pages 517-536, December.
    2. Dale W. JORGENSON & NOMURA Koji & Jon D. SAMUELS, 2015. "A Half Century of Trans-Pacific Competition: Price level indices and productivity gaps for Japanese and U.S. industries, 1955-2012," Discussion papers 15054, Research Institute of Economy, Trade and Industry (RIETI).
    3. Petrov, A.N. (Петров, А.Н.) & Kurakova, N.G. (Куракова, Н.Г.) & Uchkin, I.A. (Учкин, И.А.), 2019. "Technological mercantilism and technological colonization: new challenges for Russia [Технологический Меркантелизм И Технологическая Колонизация: Новые Вызовы Для России]," Economy of science, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 84-100, June.
    4. Andrea Fracasso, 2015. "Economic Rebalancing and Growth: the Japanese experience and China’s prospects," DEM Discussion Papers 2015/07, Department of Economics and Management.
    5. Goldin, Ian & Koutroumpis, Pantelis & Lafond, François & Winkler, Julian, 2020. "Why is productivity slowing down?," MPRA Paper 99172, University Library of Munich, Germany.
    6. Betts, Caroline, 2021. "Accounting for Japan's Lost Score," MPRA Paper 109285, University Library of Munich, Germany.
    7. Betts, Caroline, 2021. "How many (more) lost decades? The great productivity slowdown in Japan," MPRA Paper 106503, University Library of Munich, Germany.
    8. Chen, Kaiji & Wemy, Edouard, 2015. "Investment-specific technological changes: The source of long-run TFP fluctuations," European Economic Review, Elsevier, vol. 80(C), pages 230-252.
    9. Hamada, Koichi & Okada, Yasushi, 2009. "Monetary and international factors behind Japan's lost decade," Journal of the Japanese and International Economies, Elsevier, vol. 23(2), pages 200-219, June.
    10. Yahya Z. ALSHEHHI & Jozsef POPP, 2017. "Sectoral Analysis: Growth Accounting Of Tertiary Industries," SEA - Practical Application of Science, Romanian Foundation for Business Intelligence, Editorial Department, issue 14, pages 221-230, August.
    11. Akira Kohsaka & Jun-ichi Shinkai, 2013. "It's Not Structural Change, but Domestic Demand: Productivity Growth in Japan," OSIPP Discussion Paper 13E005, Osaka School of International Public Policy, Osaka University.
    12. Koji Nomura & Kozo Miyagawa & Jon D. Samuels, 2018. "Benchmark 2011 Integrated Estimates of the Japan-U.S. Price Level Index for Industry Outputs," BEA Working Papers 0161, Bureau of Economic Analysis.
    13. Yahya Z. ALSHEHHI & Judit OLÁH, 2017. "Sectorial Analysis: Growth Accounting Of Secondary Industries," Network Intelligence Studies, Romanian Foundation for Business Intelligence, Editorial Department, issue 9, pages 39-45, June.
    14. Ichiro Muto & Nao Sudo & Shunichi Yoneyama, "undated". "Productivity Slowdown in Japan's Lost Decades: How Much of It Can Be Attributed to Damaged Balance Sheets?," Bank of Japan Working Paper Series 16-E-3, Bank of Japan.
    15. Fumio Hayashi & Edward C. Prescott, 2008. "The Depressing Effect of Agricultural Institutions on the Prewar Japanese Economy," Journal of Political Economy, University of Chicago Press, vol. 116(4), pages 573-632, August.
    16. Yoshihiko Hogen & Ko Miura & Koji Takahashi, 2017. "Large Firm Dynamics and Secular Stagnation: Evidence from Japan and the U.S," Bank of Japan Working Paper Series 17-E-8, Bank of Japan.
    17. KODAMA Naomi & Huiyu LI, 2019. "Missing Growth in the Lost Decade," Discussion papers 19026, Research Institute of Economy, Trade and Industry (RIETI).
    18. Yu‐Bong Lai, 2020. "Rent‐seeking, R&D, and productivity," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(4), pages 404-419, September.
    19. Ichiro Muto & Nao Sudo & Shunichi Yoneyama, 2023. "Productivity Slowdown in Japan's Lost Decades: How Much of It Can Be Attributed to Damaged Balance Sheets?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 85(1), pages 159-207, February.

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