Technical Progress and the Growth of the Japanese Economy - Past and Future
Posted: 7 Nov 2000
This paper considers technical progress and the growth of the Japanese economy. Many economists are pessimistic about the economy's future because of the rapid ageing of the population. However, capital and total factor productivity (TFP) are much more important than labour in determining economic growth. During the high-growth era of the 1950s and 1960s, TFP contributed almost 4 percentage points to the 10 per cent annual growth rate. Since then, however, TFP growth has fallen significantly. During the 1970s, Japan's machinery industries became world leaders and made possible the export-led growth of the period 1975 85. I argue that the stagnation of the 1990s was caused by demand deficiency, and that demand creation by technical progress is the key to economic growth.
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