The Productivity Improvement and Development of Productivity Measures in Japan Presented at the Coordination Meeting and Launching Ceremony of Special APO 50th Anniversary Publication on September 7, 2011 Tsutomu Miyagawa (Gakushuin University)
Contents • An Overview of Productivity Improvement in Japan • The Development of Productivity Measures in Japan • The Role of Productivity Measures on Economic Policies
1. An Overview of Productivity Improvement in Japan • As Young (1992) and Krugman (1994) pointed out, the high economic growth in the emerging economies were attained by the accumulation in production factors. • In contrast to their findings in the 1990s, in the high economic growth era (the late 50s and the 60s) in Japan, the contribution of TFP growth to economic growth was about 60% (Kosai and Ogino (1980)).
1. An Overview of Productivity Improvement in Japan • However, the TFP growth in the 70s declined drastically due to the oil shocks. • Although the TFP growth recovered in the 80s, the low TFP growth continued after the collapse of the bubble economy.
1. An Overview of Productivity Improvement in Japan • The productivity growth in the manufacturing sector was a main driver of the whole Japanese productivity growth. →However, due to the two major shocks (Leaman shock and the 3.11 Earthquake), the international competitiveness in the Japanese manufacturing sector may lose. • The productivity growth in the non-manufacturing sector is slower than that in the manufacturing sector. Due to the slow growth of domestic demand, firms in the service sector tried to increase productivity through restructuring.
2. The Development of Productivity Measures in Japan • After WWII, Japanese economic leaders believed that productivity improvement would lead to economic prosperity. • They founded Japan Productivity Council (JPC) in 1955. • The role of JPC • Learning management methods to improve productivity inthe US and other advanced countries and transmitting them to Japanese firms • Issuing productivity measures
2. The Development of Productivity Measures in Japan • The high growth era (the 60s): Policy makers and economists focused on the capital deepening effect on the economicgrowth. Therefore, they developed policies which enhanced capital accumulation. • The 70s and 80s:Due to the two oil shocks, economists studied the effects of energy price on productivity growth.
2. The Development of Productivity Measures in Japan • The 90s and the 2000s: Due to the long-term stagnation of the Japanese economy, policy makers and economists reconfirmed that productivity growth is a key driver of economic growth. • At the same time, productivity measures and productivity studies based on productivity database at the industry levelwere developed.
2. The Development of Productivity Measures in Japan • Two major productivity database in Japan • KEO database: KEO database is constructed by the Research Institute of Industries in Keio University which has led the productivity analysis in Japan. This database is used in the APO Productivity Databook.
2. The Development of Productivity Measures in Japan (2) JIP database: Japan Industry Productivity (JIP) database is constructed by Professor Fukao of Hitotsubashi University and others and first published in 2003. This database is extended almost every year and published at the website of Research Institute of Economy, Trade, and Industry (RIETI), http://www.rieti.go.jp/jp/database/JIP2010/index.html. The productivity data in JIP is provided to OECD STAN database and EUKLEMS database. The database is also comparable to productivity database at the industry level in China and Korea.
3. The Role of Productivity Measures on Economic Policies • The development of productivity database has contributed to the better understanding of long-term economic slowdown of the Japanese economy. • An example: Slow productivity growth in the service sector→The productivity improvement in the service sector is one of key economic policies→JPC supported activities of Service Productivity & Innovation for Growth (SPRING) in the late 2000s.
3. The Role of Productivity Measures on Economic Policies • The Japanese government plans to issue official productivity measures. • Staff members of KEO database and JIP database help to construct better official productivity measures.