Productivity and Business Cycles in Japan: Evidence From Japanese Industry Data*

Abstract

Constructing a database of 37 industries, we examine whether the measured productivity in Japan is pro-cyclical and investigate the sources of this pro-cyclicality by using the production function approach employed by Hall (1990) and Basu and Fernald (1995). The aggregate Solow residual displays pro-cyclicality. A large number of industries show constant returns to scale. No significant evidence for the presence of thick-market externalities is found. Our results also hold when we consider labour hoarding, part-time employment, and the adjustment cost of investment. The results indicate that policies to revitalize the Japanese economy should concentrate on promoting productivity growth. JEL Classifications: E32, O47.

The fading 1990s in Japan: Driving forces behind the unemployment upsurge

“…This "low metabolism", they argue, seems to be an important cause for the productivity slowdown in the lost decade. Finally, Miyagawa et al (2006), in studying the pro-cyclicality of measured productivity, conclude that policies to revive the Japanese economy should focus on promoting productivity growth.…”

Measuring business cycle turning points in Japan with the Markov Switching Panel model

“…It should be pointed out that Miyagawa et al [26] suggest that policies to revitalize the Japanese economy should concentrate on spurring productivity growth. Thus, further avenues of research might consider combining all of the coincident indicators and variables of productivity growth in an attempt to measure Japanese business cycles.…”

Comment: Productivity and Business Cycles in Japan: Evidence From Japanese Industry Data*

“…Based on the framework developed by Basu and Fernald (1995), Miyagawa, Sakuragawa, and Takizawa (2006) estimate γ and β in Equation (2) The authors begin in Section 2 with examining cyclical properties of the aggregate Solow residual. They illustrate the pro-cyclicality of the Solow residual in different ways.…”

“…where φ ≡ ζα L + α K η/ω. The authors run a regression of this equation (see Miyagawa et al (2006), Table 6). Out of 33 industries, the estimates of φ are positive for 18 industries but, among them, significantly different from zero at the 10 percent level only for four industries.…”