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Does Information Technology Raise Japan's Productivity?

September 2008
Takuji Fueki*1
Takuji Kawamoto*2

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Abstract

A standard growth accounting exercise indicates that, after Japan's "lost decade," its overall total-factor-productivity (TFP) growth has increased notably since 2000. This productivity revival has been limited, however, to information technology (IT) production--has not been a broad-based productivity acceleration like that seen in the United States after the mid-1990s. This paper examines the relationship between IT and productivity gains by employing the "augmented" growth accounting framework for Japanese industry-level data from 1975 through 2005. In particular, we estimate "purified" technology change at industry level by accounting for cyclical mismeasurement of inputs. We find that the post-2000 increase in overall TFP growth does indeed appear to arise from an increase in technological change. Furthermore, the pickup in technology growth has occurred not only in the production of IT but also in the industries that use IT intensively. Our results suggest the possibility that stories of IT as a general purpose technology (GPT) could apply to Japan as well as to the United States.

KeyWords:
Total Factor Productivity, Information Technology, Japanese Economy

JEL Classification:
D24, E23, E32, O47, O53

We would like to thank Kiyohiko G. Nishimura, Hibiki Ichiue, Masahiro Higo, Eiji Maeda, Kazuo Momma, and the conference participants at the Bank of France for their helpful comments and suggestions. All errors are the sole responsibility of the authors. This paper represents the views of the authors and should not be interpreted as reflecting the official views of the BOJ.

  • *1 Research and Statistics Department, Bank of Japan
    takuji.fueki@boj.or.jp
  • *2 Financial Markets Department, Bank of Japan
    takuji.kawamoto@boj.or.jp

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