The Role of the Government in Facilitating TFP Growth during Japan’s Rapid-growth Era

It is widely known that Japan experienced rapid economic growth in the late 1950s and 1960s, when per capita gross domestic product grew at a remarkable rate of over 10 percent (Figure 4.1). There are numerous books and academic papers written on the reasons behind this success of the postwar Japanese economy. Some studies rely on descriptive macro-level statistics (Inada et al., 1993; Kosai and Kaminski, 1986; Minami, 1994; Nakamura, 1995; Ohkawa and Rosovsky, 1973) and others employ the growth-accounting framework to decompose the high-growth rate into different factors (Denison and Chung, 1976; Hayami and Ogasawara, 1999, 2002; Yasuba, 2002; Young, 1995). More recent works on the Japanese economy rely on modern calibration techniques to replicate the postwar rapid growth (Braun et al., 2006; Braun et al., 2009; Chen et al., 2006; Otsu, 2007; Parente and Prescott, 2004).