Technical change in a bubble economy: Japanese manufacturing firms in the 1990s

Takanobu Nakajima, Alice Nakamura, Emi Nakamura, Masao Nakamura

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

An important economic policy issue is to ascertain when and if technical change (TC) is driving measured growth in productivity. Was this the case for Japan during the late 1980s when a massive financial bubble was being formed? This paper addresses this question, after first further developing methods needed for this purpose. The movement of firms' TC is of particular policy interest to Japan whose economy has been suffering from a prolonged recession for more than a decade since the burst of the bubble in 1990. In the period of time immediately prior to the burst of the bubble, our estimation results show a significant drop in technical progress. What we believe these results reflect is that Japanese manufacturing firms made excessive investments in production inputs in the years when the bubble was being formed. This excessive investment in inputs did not contribute positively to TC and hence the measured productivity and economic growth of the bubble period in the late 1980s was unsustainable.

Original languageEnglish
Pages (from-to)247-271
Number of pages25
JournalEmpirica
Volume34
Issue number3
DOIs
Publication statusPublished - 2007 Jul 1

Keywords

  • Economies of scale
  • Index number method
  • Japan
  • Technical change
  • Total factor productivity

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development

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