The Depressing Effect of Agricultural Institutions on the Prewar Japanese Economy

67 Pages Posted: 11 May 2006 Last revised: 7 Jul 2022

See all articles by Fumio Hayashi

Fumio Hayashi

National Graduate Institute for Policy Studies; GRIPS

Edward C. Prescott

Arizona State University (ASU) - Economics Department; National Bureau of Economic Research (NBER)

Date Written: March 2006

Abstract

The question we address in this paper is why the Japanese miracle didn't take place until after World War II. For much of the pre-WWII period, Japan's real GNP per worker was not much more than a third of that of the U.S., with falling capital intensity. We argue that its major cause is a barrier that kept agricultural employment constant at about 14 million throughout the prewar period. In our two-sector neoclassical growth model, the barrier-induced sectoral mis-allocation of labor and a resulting disincentive for capital accumulation account well for the depressed output level. Were it not for the barrier, Japan's prewar GNP per worker would have been close to a half of the U.S. The labor barrier existed because, we argue, the prewar patriarchy, armed with paternalistic clauses in the prewar Civil Code, forced the son designated as heir to stay in agriculture.

Suggested Citation

Hayashi, Fumio and Prescott, Edward C., The Depressing Effect of Agricultural Institutions on the Prewar Japanese Economy (March 2006). NBER Working Paper No. w12081, Available at SSRN: https://ssrn.com/abstract=888283

Fumio Hayashi (Contact Author)

National Graduate Institute for Policy Studies ( email )

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Tokyo, 106-0032
Japan

HOME PAGE: http://https://sites.google.com/site/fumiohayashi/home

GRIPS ( email )

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Tokyo 106-8677, Tokyo 106-8677
Japan

Edward C. Prescott

Arizona State University (ASU) - Economics Department ( email )

Tempe, AZ 85287-3806
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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