Explaining Japan's Unproductive Two Decades

21 Pages Posted: 21 Dec 2013

See all articles by Kyoji Fukao

Kyoji Fukao

Hitotsubashi University - Institute of Economic Research

Date Written: December 2013

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–gross domestic product ratio continued to increase after 1991, and this increase in the capital–gross domestic product ratio 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, Japan's accumulation of information and communication technology capital and intangible investment was very slow. Compared with large firms, which enjoyed an acceleration in the total factor productivity growth in recent years, Japanese small‐ and medium‐sized enterprises were left behind in information and communication technology 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 spillovers from large firms to small‐ and medium‐sized enterprises seem to have declined.

Keywords: Abenomics, information and communication technology, intangible investment, Japan's two lost decades, low metabolism, total factor productivity

JEL Classification: D24, E22, J24, L25, O47, O53

Suggested Citation

Fukao, Kyoji, Explaining Japan's Unproductive Two Decades (December 2013). Asian Economic Policy Review, Vol. 8, Issue 2, pp. 193-213, 2013, Available at SSRN: https://ssrn.com/abstract=2370668 or http://dx.doi.org/10.1111/aepr.12020

Kyoji Fukao (Contact Author)

Hitotsubashi University - Institute of Economic Research ( email )

2-1 Naka Kunitachi-shi
Tokyo 186-8306
Japan

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