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Service Sector Productivity in Japan: The key to future economic growth

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  • FUKAO Kyoji

Abstract

This paper aims to examine three issues: how bad the productivity performance in Japan's service sector has been; why it is important to accelerate TFP growth in the service sector; and why TFP has stagnated in Japan's service sector. The main findings of the paper are as follows. First, TFP growth in the manufacturing sector is much higher than that in other sectors, although the manufacturing sector's share is declining rapidly. For Japan, whose population is in decline, productivity growth in the service sector is key for economic growth. Second, TFP growth in ICT-using sectors declined substantially after 1995. Third, accumulation of ICT assets in Japan was very slow in comparison with other developed countries. Forth, the low level of intangible investment is probably one important cause of the stagnation of TFP; another is that Japan's service sector has fallen behind with regard to investment in ICT. Fifth, it seems that Japan's low metabolism also impedes productivity growth. Sixth, firms invest little in on-the-job training and off-the-job training for part-time workers, and the increase in part-time workers may have slowed down human-capital accumulation. Seventh, it appears that Japanese firms have fallen behind in terms of internationalization and economies of scale.

Suggested Citation

  • FUKAO Kyoji, 2010. "Service Sector Productivity in Japan: The key to future economic growth," Policy Discussion Papers 10001, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:polidp:10001
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    File URL: https://www.rieti.go.jp/jp/publications/pdp/10p007.pdf
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    Cited by:

    1. Akihito Asano & Rod Tyers, 2016. "Japan's oligopolies: potential gains from third arrow reforms," CAMA Working Papers 2016-03, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Idris Jajri, 2011. "Total Factor Productivity and Output Growth in Malaysian Service Sector," Annals - Economic and Administrative Series -, Faculty of Business and Administration, University of Bucharest, vol. 5(1), pages 63-76, December.
    3. Rod Tyers & Jenny Corbett, 2012. "Japan's economic slowdown and its global implications: a review of the economic modelling," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 26(2), pages 1-28, November.
    4. Akihito Asano & Rod Tyers, 2015. "Third Arrow Reforms and Japan’s Economic Performance," Economics Discussion / Working Papers 15-17, The University of Western Australia, Department of Economics.
    5. 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.
    6. Rod Tyers & Ying Zhang, 2011. "Japan’s Economic Recovery: Insights from Multi-Region Dynamics," CAMA Working Papers 2011-18, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    7. KONISHI Yoko & NISHIYAMA Yoshihiko, 2016. "Efficiency of the Retail Industry: Case of inelastic supply functions," Discussion papers 16054, Research Institute of Economy, Trade and Industry (RIETI).
    8. Naoshi Ikeda, & Kotaro Inoue & Sho Watanabe, 2017. "Enjoying the Quiet Life: Corporate Decision-Making by Entrenched Managers," NBER Working Papers 23804, National Bureau of Economic Research, Inc.
    9. Vipin Arora & Rod Tyers & Ying Zhang, 2014. "Reconstructing the Savings Glut: The Global Implications of Asian Excess Saving," CAMA Working Papers 2014-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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