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Explaining Japan's Unproductive Two Decades

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  • FUKAO Kyoji

Abstract

Using industry- and micro-level data, this paper examines why Japan's productivity growth has been slow for such a long time and how it can be accelerated in the future. Japan's capital-to-gross domestic product (GDP) ratio continued to increase after 1991, which must have contributed to the decline in the rate of return on capital in Japan by decreasing the marginal productivity of capital. On the other hand, accumulation of information and communications technology (ICT) capital and intangible investment in Japan was very slow. Compared with large firms, which enjoyed an acceleration in total factor productivity (TFP) growth in recent years, Japanese small and medium-sized enterprises (SMEs) were left behind in ICT capital and intangible investment, and their productivity growth has been very low. Furthermore, as large firms expanded their supply chains globally and relocated their factories abroad, research and development (R&D) spillovers from large firms to SMEs seem to have declined.

Suggested Citation

  • FUKAO Kyoji, 2013. "Explaining Japan's Unproductive Two Decades," Policy Discussion Papers 13021, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:polidp:13021
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    Cited by:

    1. Sébastien Lechevalier & Pauline Debanes & Shin Wonkyu, 2016. "Financialization and industrial policies in Japan and Korea: Evolving complementarities and loss of institutional capabilities," Working Papers halshs-01431783, HAL.
    2. Jong-Wha Lee, 2013. "Comment on “Explaining Japan's Unproductive Two Decades”," Asian Economic Policy Review, Japan Center for Economic Research, vol. 8(2), pages 214-215, December.
    3. repec:spr:anresc:v:59:y:2017:i:2:d:10.1007_s00168-017-0833-6 is not listed on IDEAS
    4. Marcus Noland, 2013. "Comment on “Explaining Japan's Unproductive Two Decades”," Asian Economic Policy Review, Japan Center for Economic Research, vol. 8(2), pages 216-217, December.
    5. W Max Corden & Sisira Jayasuriya, 2016. "The Japanese macroeconomic mystery," Departmental Working Papers 2016-03, The Australian National University, Arndt-Corden Department of Economics.
    6. Takatoshi Ito & Kazumasa Iwata & Colin McKenzie & Shujiro Urata, 2013. "Japan at the Crosswords: Editors' Overview," Asian Economic Policy Review, Japan Center for Economic Research, vol. 8(2), pages 169-192, December.
    7. 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).
    8. Piotr Cizkowicz & Andrzej Rzonca & Andrzej Toroj, 2015. "In search for appropriate lower bound.Zero lower bound vs. positive lower bound under discretion and commitment," NBP Working Papers 215, Narodowy Bank Polski, Economic Research Department.
    9. FUKAO Kyoji & IKEUCHI Kenta & KWON Hyeog Ug & YoungGak KIM & MAKINO Tatsuji & TAKIZAWA Miho, 2015. "Lessons from Japan's Secular Stagnation," Discussion papers 15124, Research Institute of Economy, Trade and Industry (RIETI).

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