The 1990s in Japan: A Lost Decade

Hayashi, Fumio; Prescott, Edward C.

doi:10.1006/redy.2001.0149

Cited by 627 publications

(382 citation statements)

References 8 publications

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“…Second, we analysed the rate of return on capitals using models that deal with simultaneity bias, and found that our results contradict those in previous studies. Furthermore, this paper is novel in that it applies 18 The result is consistent with that by Hayashi and Prescott (2002). Jorgenson and Nomura (2007) also demonstrate that the TFP growth of the Japanese manufacturing sector stalled during between 1990 and 2000, which is consistent with our findings in this paper.…”

Section: Discussionsupporting

confidence: 87%

“…However, the number of patent applications by Japanese firms in the United States is little more than 20%. 5 Low TFP growth was a key reason for the Japanese lost decade (Hayashi, Prescott 2002;Jorgenson, Nomura 2007). Branstetter and Nakamura (2003) show that R&D productivity of Japanese firms reached a plateau around 1990 and grew little thereafter.…”

Section: Previous Studiesmentioning

confidence: 99%

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WHY HAVE R&D-INTENSIVE INDUSTRIES IN JAPAN EXPERIENCED A RECENT DECLINE IN PERFORMANCE? EVIDENCE FROM PANEL DATA OF LISTED FIRMS IN JAPANESE R&D-INTENSIVE INDUSTRIES

Sakai

2016

Journal of Business Economics and Management

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Abstract. Previous studies show that the rate of return on research and development (R&D) capital is high. However, R&D-intensive industries in Japan have recently experienced a decline in performance. This study estimates the rate of return on R&D capital and physical capital as well as total factor productivity (TFP) to solve this puzzle. The rate of return is properly estimated applying the methods, which deal with simultaneity bias issues. After Japan entered the "lost decade", the rate of return on R&D capital dropped significantly, while the rate on physical capital did not. This trend cannot be found by the methods without considering the issues, typically used in previous studies. The slowdown of TFP growth occurs coincidentally with a declining rate of return on R&D capital, which suggests the importance of innovations that enable effective use of R&D capital. Considering the trends, the declining rate of return on R&D capital along with the slowdown of TFP growth are the main causes of the low performance of recent R&D-intensive industries. The results of this paper also offer suggestions on economic policies and growth strategies.Keywords: research and development (R&D), rate of return on R&D capital, rate of return on physical capital, simultaneity, production function, total factor productivity (TFP), R&D-intensive industries, Japanese firms, growth strategy.

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Section: Discussionsupporting

confidence: 87%

Section: Previous Studiesmentioning

confidence: 99%

WHY HAVE R&D-INTENSIVE INDUSTRIES IN JAPAN EXPERIENCED A RECENT DECLINE IN PERFORMANCE? EVIDENCE FROM PANEL DATA OF LISTED FIRMS IN JAPANESE R&D-INTENSIVE INDUSTRIES

Sakai

2016

Journal of Business Economics and Management

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“…According to Hayashi and Prescott (2002) the persistent low productivity growth since the Lost Decades is driven by a weak TFP expansion, compared to the earlier period. It might be linked to low incentives of firms to innovate in highly protected markets (Hamao, Mei and Xu, 2007).…”

Section: Growth Trends In Japan and The Euro Areamentioning

confidence: 99%

Long-term growth perspectives in Japan and the Euro area

Dreger

2017

Asia Eur J

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: Euro area countries and Japan are confronted with similar challenges. Potential output is on a falling trend in the euro area, and the decrease started well before the financial crisis. In Japan, low output growth is a striking feature since many years, despite the unconventional monetary policy stance and massive fiscal stimulus programs provided by the government. According to a growth accounting exercise based on a Cobb-Douglas production function, the development in both economies can be traced to a weak evolution of TFP. Weak capital deepening is detected especially in the euro area. Driven by high uncertainty with regard to the business cycle, the willingness of firms to undertake investment is only modest and constitutes the achilles heel for a smooth recovery. Both economies are not well prepared to manage the demographic challenges caused by an elderly population. Given that debt-to-GDP ratios are already at record heights, the scope for further demand driven policies is rather limited, especially in Japan. Instead, structural reforms are on the agenda to promote long run growth and a smooth development of the global economy. Terms of use: Documents in

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“…The TFP (total factor productivity) growth calculated by the macro growth accounting, therefore, confuses genuine TFP growth with the contribution of IT capital to the growth of capital services. Hayashi and Prescott (2002) showed that Japan's great stagnation in the 1990s is wellaccounted for by the standard neoclassical growth model with a TFP slowdown in the 1990s.…”

Section: Introductionmentioning

confidence: 99%

“…It distinguishes between non-IT capital and IT capital in the production function. In Section 5, following Hayashi and Prescott (2002), we calibrate the model to the Japanese economy in the 1984-89 period and report results from the simulation of the model from year 1990 on. The multi-sector model does well in accounting for the output slump of the 90s but less well than the one-sector model for the rise in the capital-output ratio in the 1990s.…”

Section: Introductionmentioning

confidence: 99%

Can IT be Japan's Savior?

Hayashi¹,

Nomura²

2005

Self Cite

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This paper constructs a multi-sector model to take explicit account of the very sharp change in the relative price between non-IT and IT goods. The model is calibrated to the Japanese economy, and its solution path from 1990 on is compared to Japan's macroeconomic performance in the 1990s.Compared to the one-sector analysis of Japan in the 1990s in Hayashi and Prescott (2002), our model does slightly better or just as well in accounting for Japan's output slump and does worse in accounting for the capital-output ratio. We also show that, to revive a 2% long-term growth in percapita GDP, Japan needs to direct 10% of private total hours to the IT sector.

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The 1990s in Japan: A Lost Decade

Cited by 627 publications

References 8 publications

WHY HAVE R&D-INTENSIVE INDUSTRIES IN JAPAN EXPERIENCED A RECENT DECLINE IN PERFORMANCE? EVIDENCE FROM PANEL DATA OF LISTED FIRMS IN JAPANESE R&D-INTENSIVE INDUSTRIES

WHY HAVE R&D-INTENSIVE INDUSTRIES IN JAPAN EXPERIENCED A RECENT DECLINE IN PERFORMANCE? EVIDENCE FROM PANEL DATA OF LISTED FIRMS IN JAPANESE R&D-INTENSIVE INDUSTRIES

Long-term growth perspectives in Japan and the Euro area

Can IT be Japan's Savior?

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