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Evolution of Economic Systems: The Case of Japan


  • Okazaki, Tetsuji

    (Faculty of Economics, University of Tokyo.)

  • Masahiro Okuno-Fujiwara

    (Faculty of Economics, University of Tokyo.)


In this paper we shall provide a theoretical overview of what we are the main sources of their evolution and what are the chief implications of focusing around institutions and economic systems. For the former, we identify innovation, adaptation for environmental changes, international interactions and coordination as main sources. For the latter, we distinguish two different mechanisms to enforce cooperation; trust-based and authority-based mechanisms. We shall then apply this theoretical framework to evolution of the Japanese economic system starting late nineteenth century. The Japanese economic system started rapid evolution through integrating Western institutions with traditional community-based institutions. Although this hybrid system endogenously evolved toward pure authority-based system in prewar period, this evolutionary path came to a turning point in 1940's. Investments made by employees, bank and firm, and inter-firm relationships during the WWII and not only been sunk but also decreased the value of outside options for the members who took part in these relationships. Those investments became a basis for the evolution of quasi community-based institutions in the postwar Japan.

Suggested Citation

  • Okazaki, Tetsuji & Masahiro Okuno-Fujiwara, 1997. "Evolution of Economic Systems: The Case of Japan," CIRJE F-Series 97-F-18, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:97f18

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    References listed on IDEAS

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    Cited by:

    1. Masahiko Aoki, 2013. "The Evolution of Organizational Conventions and Gains from Diversity," Chapters,in: Comparative Institutional Analysis, chapter 6, pages 59-71 Edward Elgar Publishing.
    2. Gagliardi, Francesca, 2008. "Institutions and economic change: A critical survey of the new institutional approaches and empirical evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(1), pages 416-443, February.
    3. Tim Goydke, 2011. "Institutional Change and the Role of Government: Technology Policy in Japan and Korea," Chapters,in: Institutional Variety in East Asia, chapter 4 Edward Elgar Publishing.
    4. Chiaki Moriguchi, 2000. "The Evolution of Employment Relations in U.S. and Japanese Manufacturing Firms, 1900-1960: A Comparative Historical and Institutional Analysis," NBER Working Papers 7939, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy


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