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A Model of Technology Transfer in Japan's Rapid Economic Growth Period

  • Aoki, Shuhei

Why did the Japanese economy stagnate before World War II, how did it achieve rapid economic growth after the war, and why did it stagnate again after the 1970s? To answer these questions, I developed a two-country trade model with technology transfer, where rms in the two countries compete in a Bertrand fashion, where rms in a developed country (the U.S.) transfer technology to rms in a developing country (Japan) if it is protable to do so, and where the technology transfer is the engine of economic growth. In this model, among multiple equilibria, the equilibrium with low labor cost in Japan was chosen during the rapid growth period. As a result, the rms in the developed country transferred technology to the rms in the developing country, resulting in rapid growth. However, during the other periods, the equilibrium with high labor cost in Japan was chosen, which caused stagnation. The model is quantitatively consistent with the per capita GDP relative to the U.S., the purchasing power parity-exchange rate ratio, and to some degree, the swings in labor share of postwar Japan.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29235.

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Date of creation: 01 Mar 2011
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Handle: RePEc:pra:mprapa:29235
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  1. Keisuke Otsu, 2007. "A Neoclassical Analysis of the Postwar Japanese Economy," IMES Discussion Paper Series 07-E-01, Institute for Monetary and Economic Studies, Bank of Japan.
  2. Krugman, Paul, 1987. "The narrow moving band, the Dutch disease, and the competitive consequences of Mrs. Thatcher : Notes on trade in the presence of dynamic scale economies," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 41-55, October.
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  17. Dani Rodrik, 2008. "The Real Exchange Rate and Economic Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 365-439.
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