Productivity Improvement and Economic Growth
May 10, 2018
This paper summarizes recent discussion on labor productivity which is the source of medium- to long-term economic growth and observes the characteristics of recent productivity developments using relevant statistical data. Furthermore, the paper examines the background of recent Japan's low labor productivity growth and analyzes issues regarding Japan's sustainable growth.
Labor productivity in major advanced countries has been experiencing a slowdown in recent years. This is mainly affected by the slowdown of Total Factor Productivity (TFP). In Japan, there are two reasons behind the slowdown: first, technology and ideas accumulated by research and development (R&D) and management resources such as capital and labor are not utilized efficiently; and second, these resources are not efficiently reallocated among corporations.
In order to improve Japan's productivity in the medium to long-term, it is desirable to encourage the flexible reallocation of management resources such as capital and labor by changing working process at the corporate level in accordance with changes in the socio-economic environment and the advent of new technologies, as well as by improving efficiency in the labor and capital markets.
E20; O30; O47
Productivity; Potential growth; Intangible assets; Resource reallocation
We would like to thank Kosuke Aoki, Hibiki Ichiue, Seisaku Kameda, Ryo Kato, Nobuyuki Kinoshita, Yoichi Matsubayashi, Toshitaka Sekine, Tomohiro Sugo, and Toshinao Yoshiba as well as the staff of the Bank of Japan for their helpful comments. We also thank Wakako Kaku for assisting the data compilation as well as Chikako Wakasa and Lisa Uemae for helping with English translation. The opinions expressed here, as well as any remaining errors, are those of the authors and should not be ascribed to the Bank of Japan.
- *1Research and Statistics Department, Bank of Japan (currently at the Matsumoto Branch)
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- *2Research and Statistics Department, Bank of Japan
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- *3Research and Statistics Department, Bank of Japan (currently at the Monetary Affairs Department)
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