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Missing Growth in the Lost Decade

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  • KODAMA Naomi
  • Huiyu LI

Abstract

Standard measurement often impute innovation from creative destruction and new varieties using surviving products. This can lead to an understatement of growth, if surviving products improve less than creatively destroyed products and new varieties. This paper estimates this bias for Japan using establishment-level data from the Japanese Census which covers all private businesses. We find that the correction increases Japan's productivity growth by 0.39 percentage points per year between 1997 and 2009 with most of the missing growth coming from non-manufacturing industries. As this bias is smaller than the bias found for the U.S., our results imply 0.23 percentage points per year bigger difference between productivity growth rates in the U.S. and Japan. The larger difference mostly stems from a larger difference in productivity growth rates for non-manufacturing industries.

Suggested Citation

  • KODAMA Naomi & Huiyu LI, 2019. "Missing Growth in the Lost Decade," Discussion papers 19026, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:19026
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    References listed on IDEAS

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    1. Philippe Aghion & Antonin Bergeaud & Timo Boppart & Peter J. Klenow & Huiyu Li, 2019. "Missing Growth from Creative Destruction," American Economic Review, American Economic Association, vol. 109(8), pages 2795-2822, August.
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    3. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
    4. Kyoji Fukao & Hyeog Ug Kwon, 2006. "Why Did Japan'S Tfp Growth Slow Down In The Lost Decade? An Empirical Analysis Based On Firm‐Level Data Of Manufacturing Firms," The Japanese Economic Review, Japanese Economic Association, vol. 57(2), pages 195-228, June.
    5. Abe, Naohito & Fukao, Kyoji & Ikeuchi, Kenta & Rao, D.S. Prasada, 2018. "Quantifying and Accounting for Quality Differences in Services in International Price Comparisons: A Bilateral Price Comparison between United States and Japan," Discussion Paper Series 671, Institute of Economic Research, Hitotsubashi University.
    6. 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.
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