Abstract
This chapter discusses the different possible roles played by the Japanese government to enhance the total factor productivity (TFP) growth rate during the “growth miracle period” (1955–1973) as well as the “two lost decades” (1990–2009). The growth accounting exercise conducted in this chapter using the Japanese data shows that TFP was not only the driving force for the rapid economic growth of the growth miracle period but also a decline in the TFP growth rate was responsible for the sluggish economies, particularly in the 1990s. High net technology imports were demonstrated to have likely played an important role in the TFP’s rapid rise during the growth miracle period. However, possible causes behind the TFP’s slower growth rate during the “two lost decades” remains actively debated in literature. Caballero et al. (Am Econ Rev 98(5):1943–1977, 2008) offers the possible explanation of zombie firms, i.e., unproductive firms that should exit the market but survive because of support from banks or the government. If “zombie lending” is a major cause of slower TFP growth rate, opening the markets and letting firms compete through deregulation would be one promising policy the Japanese government could enact in order to boost the TFP growth rate.
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Notes
- 1.
Note that the natural logarithm of a variable can be interpreted as the growth rate of that variable.
- 2.
Data based on the 1993 System of National Accounts are available only for years after 1979. Data for earlier years are based on the 1968 SNA, which have been integrated with the 1993 SNA data by extending back the latter by the annual change in the corresponding 1968 SNA series.
- 3.
The capital stock series are obtained using the perpetual inventory method, assuming that the initial capital-output ratio is 0.77 (the value is taken from Hayashi and Prescott 2002) and the depreciation rate is 0.1. The capital share of output is set to the conventional value of 1/3.
- 4.
Also see Aoki et al. (2009) for a discussion of the driving forces of TFP growth in this period.
- 5.
For instance, the average annual growth rate of real GDP in the USA was only 1.8 and 2.5 % during 1977–1982 and 1987–1992 compared to 4.5 % during 1982–1987. Similarly, the average annual growth rate of real GDP in the UK was only 2.2 % during 1980–1992 compared to 3.6 % during 1982–1987.
- 6.
The causes of the drop in the within effect in the manufacturing sector in the 1990s remain unclear and warrant further research.
- 7.
See Caballero et al. (2008) for details of how zombie firms are identified.
- 8.
The zombie index for an industry is constructed by calculating the share of total assets held by zombie firms.
- 9.
One possibility is that the rate of return on R&D investment declined in the 1990s and that this may be partly responsible for the slowdown in TFP growth. Kim et al. (2008), however, show that although the rate of return rate does decrease, the extent of this decrease is limited.
- 10.
See Tett (2003) for the case of Shinsei Bank.
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Niizeki, T. (2015). Japan’s Economic Growth and the Role of Government. In: Yülek, M. (eds) Economic Planning and Industrial Policy in the Globalizing Economy. Public Administration, Governance and Globalization, vol 13. Springer, Cham. https://doi.org/10.1007/978-3-319-06474-1_4
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DOI: https://doi.org/10.1007/978-3-319-06474-1_4
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