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How sectoral technical progress and factor substitution shaped Japan’s structural transformation?

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  • Manu, Ana-Simona

Abstract

The paper quantitatively assesses the importance of supply-side drivers in the transition of the Japanese economy from low-skilled to high-skilled sectors and its implication for growth, labor demand and labor income shares. A sectoral supply-side system, estimated over the 1980-2012 period, reveals different rates of technical progress across production factors and sectors, but also heterogeneity in the sectoral elasticity of substitution between capital and labor. The fact that capital and labor are easily substitutable in low-skilled services but not in high-skilled services, coupled with the dominant role of capital-augmenting technical change in services is a key factor behind the relocation of labor towards high-skilled services, as well as behind the declining trend in the labor income share in low-skilled services. JEL Classification: O47, O33, J23

Suggested Citation

  • Manu, Ana-Simona, 2022. "How sectoral technical progress and factor substitution shaped Japan’s structural transformation?," Working Paper Series 2641, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20222641
    Note: 2663204
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    biased technical change; CES production function; labor demand; labor income share;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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