Productivity and technological progress of the Japanese manufacturing industries, 2000–2014: estimation with data envelopment analysis and log-linear learning model

A Correction to this article was published on 20 September 2019

This article has been updated

Abstract

How has the Japanese manufacturing sector fared in productivity and technological learning in recent years? To answer this, we summarized the manufacturing industry into 3-digit sub-sector (25 sub-sectors) and evaluated the entire manufacturing industry. Our study covers 15 years of production cycles (2000–2014). Using data envelopment analysis and loglinear learning models, we empirically estimated the productivity and technological learning of these industries. The result shows negative (− 0.6%) total factor productivity (TFP) growth between 2000 and 2014. TFP was particularly affected by 2001, and 2008/2009 financial crisis. TFP regress also deepened in recent years (2011–2014) which we blamed on both internal and external shocks in the system. We showed that positive TFP observed in other years resulted from technical progress and efficiency improvement. Industry-level results were consistent with the annual mean result which suggest a common economic downturn. Estimated progress ratios from learning models show that individual industry exhibits unique learning rates, with some industries showing technological learning (i.e., decreasing unit cost of production) between 2000 and 2007 and others between 2010 and 2014. Industries viz. production machinery, electrical devices and circuit, chemical, pharmaceutical, and food manufacturing showed sustained learning between 2001 and 2013, implying huge cost saving as outputs expand. The overall result, however, showed that learning got worst and was lost at some point between 2008 and 2014. We conclude that productivity differentials explained by learning rates show that technological progress and innovations in Japanese manufacturing were capital intensive and cost inefficient and that Japanese manufacturing industry has not fully regained its competitiveness as the world’s leading manufacturing hub. We argued that for productivity improvement in Japanese manufacturing industries, there is a need for policy thrust to restore and ensure sustained learning within and across the industries.

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Fig. 1

(Source: Karaoz and Mesut 2005)

Fig. 2

(Source: Author)

Fig. 3
Fig. 4

Change history

  • 20 September 2019

    In the original publication of the article, the equation 12 was published incorrectly and the footnote was missing. The correct version of equation 12 and footnote is as below.

Notes

  1. 1.

    All variables except number of employees are measured in yen.

  2. 2.

    The value of \(\lambda\) indicates the technical biases associated with production expansion. \(\lambda = 1\) indicate neutrality in technological progress whereas \(\lambda > 1\), suggests that capital labour ratio proportionally increases as output expands (see Pramongkit et al. 2000; Karaoz and Mesut 2005).

  3. 3.

    Published annually from 2007 onward and downloadable at http://www.meti.go.jp/english/report/index_whitepaper.html#monodzukuri.

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Acknowledgements

We thank Japan Ministry of Economy, Trade and Industry (METI) for publishing and making data on manufacturing industries of Japan openly free for research. And Japan International Cooperation Agency (JICA) for generously providing scholarship fund to Mr. ADUBA Joseph Junior during his study at Ritsumeikan Asia Pacific University, under the ABE initiatives program.

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Appendices

Appendix A: Test for return to scale production technologies

Panel A: Output-value added
lnva Coef. St.Err. t value p value (95% Conf. Interval) Sig
lnl 6.924 0.713 9.71 0.000 5.526 8.323 ***
lnk 0.425 0.053 8.07 0.000 0.322 0.528 ***
Constant − 8.912 1.073 − 8.30 0.000 − 11.016 − 6.809 ***
Mean dependent var 14.621 SD dependent var 1.393
Number of obs 375.000 Chi square 2140.085
Prob > Chi2 0.000 Akaike crit. (AIC) − 49.022
lnva Coef. Std.Err. z p > z (95% Conf. Interval)
IRS/DRS test 7.349 0.665 11.050 0.000 6.046 8.653
Chi2 91.15 Prob > Chi2 0.000
Panel B: Output-revenue
lnR Coef. St.Err. t value p value (95% Conf. Interval) Sig
lnl 6.004 0.788 7.61 0.000 4.458 7.549 ***
lnk 0.499 0.054 9.16 0.000 0.392 0.606 ***
Constant − 4.923 1.194 − 4.12 0.000 − 7.264 − 2.582 ***
Mean dependent var 16.189 SD dependent var 1.414
Number of obs 375.000 Chi square 1333.981
Prob > Chi2 0.000 Akaike crit. (AIC) − 430.461
lnR Coef. Std.Err. z P > z (95% Conf. Interval)
IRS/DRS test 6.503 0.740 8.790 0.000 5.052 7.953
Chi2 55.27 Prob > Chi2 0.0000
  1. IRS increasing returns to scale, DRS decreasing return to scale
  2. ***p < 0.01, ** p < 0.05, * p < 0.1

Appendix B: Estimated technical efficiency using VRS production technology assumption

Manufacturing industry 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Business oriented machinery 77 76 68 64 64 53 54 46 42 50 49 39 36 34 37
Ceramic, stone and clay products 43 40 38 35 34 27 28 26 26 31 30 25 26 25 27
Chemical and allied products 84 83 81 75 80 72 75 75 78 85 89 87 81 81 79
Electrical machinery, equipment and supplies 100 100 100 100 100 63 72 64 59 69 70 64 66 69 74
Electronic parts, devices and electronic circuits 75 64 65 59 58 43 45 44 40 50 48 46 47 44 49
General-purpose machinery 67 66 62 60 64 36 40 37 39 44 40 36 36 32 37
Information and comm. electronic equipment 93 99 96 99 94 86 89 87 90 97 95 65 61 57 51
Iron and steel 60 57 54 52 57 54 59 62 70 63 74 68 55 56 62
Production machinery 64 57 51 54 58 47 51 48 45 43 45 39 39 35 43
Transport equipment 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
Beverages, tobacco and feed 75 75 69 70 65 47 46 41 46 60 61 42 43 41 43
Food 75 83 83 77 76 69 72 68 75 94 92 85 86 83 88
Furniture and fixtures 75 77 74 71 66 54 60 52 56 68 59 58 62 56 59
Leather tanning, leather products and fur skins 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
Lumber and wood products 79 80 88 76 69 59 72 53 55 66 60 58 60 59 62
Miscellaneous manufacturing industries 71 79 66 63 51 41 48 50 54 63 49 39 44 37 39
Printing and allied industries 63 65 58 51 49 39 41 37 39 54 45 38 40 36 35
Pulp, paper and paper products 41 40 39 36 34 27 29 28 29 38 35 30 30 30 32
Textile mill products 45 43 39 37 37 25 30 27 29 53 45 27 29 26 27
Fabricated metal and products 53 54 53 45 51 43 45 44 44 56 51 45 48 44 48
Non-ferrous metals and products 43 42 38 36 37 36 51 53 46 49 59 49 45 43 46
Petroleum and coal products 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
Plastic products 71 67 57 52 55 46 48 42 41 46 41 37 41 38 40
Ruber products 39 46 40 33 32 26 28 27 29 31 30 26 27 23 25
Industry average 70 70 67 64 64 54 58 55 55 63 61 54 54 52 54

Appendix C: Summary of Malmquist productivity index by industrial groups*

  2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Panel A: High tech industries
Business oriented machinery
 EFFCH 0.981 0.887 0.939 1.016 0.825 1.016 0.850 0.911 1.197 0.985 0.783 0.935 0.947 1.082
 TECHCH 0.961 1.098 1.112 1.053 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.094 0.902
 TFPCH 0.942 0.974 1.044 1.070 1.003 0.982 0.947 0.862 0.835 1.199 0.940 0.863 1.036 0.976
Electronic dev. and electronic circuits
 EFFCH 0.848 1.019 0.911 0.984 0.741 1.050 0.872 1.012 1.256 0.839 0.772 1.026 0.946 1.150
 TECHCH 0.961 1.098 1.123 1.043 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.094 0.902
 TFPCH 0.815 1.118 1.023 1.027 0.901 1.014 0.971 0.957 0.876 1.021 0.927 0.947 1.036 1.037
Info. and comm. Electronic equipment
 EFFCH 0.707 0.915 0.901 1.032 0.863 1.027 0.968 0.954 1.186 0.846 0.840 0.997 0.885 0.993
 TECHCH 0.984 1.098 1.089 1.072 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.094 0.902
 TFPCH 0.695 1.004 0.982 1.106 1.050 0.992 1.078 0.902 0.828 1.030 1.009 0.921 0.968 0.896
Pharmaceutical industries
 EFFCH 0.970 0.942 0.858 0.993 0.847 1.050 0.962 1.013 1.308 0.886 0.792 1.067 0.955 1.077
 TECHCH 0.998 1.098 1.085 1.078 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.094 0.902
 TFPCH 0.968 1.034 0.930 1.070 1.030 1.014 1.072 0.959 0.913 1.078 0.951 0.985 1.045 0.972
Panel B: Medium high-tech industries
General-purpose machinery
 EFFCH 0.950 0.891 0.948 1.025 0.661 1.090 0.942 1.040 1.121 0.929 0.890 0.990 0.893 1.172
 TECHCH 0.961 1.098 1.114 1.050 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.094 0.902
 TFPCH 0.913 0.978 1.056 1.077 0.803 1.053 1.050 0.984 0.782 1.131 1.069 0.915 0.977 1.057
Production machinery
 EFFCH 0.892 0.903 1.045 1.079 0.811 1.092 0.932 0.938 0.954 1.056 0.861 0.996 0.900 1.231
 TECHCH 0.961 1.098 1.116 1.048 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.094 0.902
 TFPCH 0.857 0.992 1.166 1.130 0.985 1.055 1.039 0.887 0.666 1.285 1.033 0.920 0.985 1.110
Electrical machinery, equip.
 EFFCH 0.963 0.945 1.099 0.853 0.517 1.180 0.902 0.920 1.313 0.873 0.743 1.125 1.019 1.106
 TECHCH 0.961 1.098 1.121 1.044 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.094 0.902
 TFPCH 0.925 1.037 1.233 0.890 0.629 1.140 1.005 0.871 0.916 1.063 0.892 1.039 1.115 0.997
Chemical
 EFFCH 0.970 0.942 0.858 0.993 0.847 1.050 0.962 1.013 1.308 0.886 0.792 1.067 0.955 1.077
 TECHCH 0.998 1.098 1.085 1.078 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.094 0.902
 TFPCH 0.968 1.034 0.930 1.070 1.030 1.014 1.072 0.959 0.913 1.078 0.951 0.985 1.045 0.972
Transport equipment
 EFFCH 1.026 0.995 0.894 0.940 0.814 1.073 0.982 0.958 1.278 0.876 0.838 1.070 0.878 1.001
 TECHCH 0.982 1.098 1.097 1.067 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.094 0.902
 TFPCH 1.007 1.093 0.981 1.004 0.989 1.036 1.095 0.906 0.892 1.066 1.006 0.988 0.961 0.903
Panel C: Medium low-tech industries
Iron and steel
 EFFCH 0.913 0.976 0.934 1.132 0.888 1.017 1.046 1.171 0.924 1.001 0.876 0.910 1.038 1.117
 TECHCH 1.016 1.098 1.075 1.087 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.094 0.902
 TFPCH 0.927 1.071 1.004 1.230 1.079 0.982 1.166 1.107 0.645 1.218 1.052 0.840 1.136 1.008
Petroleum and coal products
 EFFCH 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
 TECHCH 1.108 1.050 1.026 1.104 1.189 1.013 1.100 0.905 0.716 1.196 1.180 0.974 1.000 0.925
 TFPCH 1.108 1.050 1.026 1.104 1.189 1.013 1.100 0.905 0.716 1.196 1.180 0.974 1.113 0.925
Plastic products
 EFFCH 0.937 0.850 0.903 1.074 0.828 1.040 0.890 0.972 1.123 0.878 0.916 1.094 0.925 1.061
 TECHCH 0.961 1.098 1.116 1.044 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.000 0.902
 TFPCH 0.901 0.933 1.008 1.121 1.006 1.004 0.992 0.920 0.784 1.069 1.100 1.010 1.012 0.957
Rubber products
 EFFCH 1.178 0.888 0.806 0.976 0.803 1.084 0.969 1.065 1.091 0.978 0.840 1.045 0.870 1.088
 TECHCH 0.981 1.098 1.095 1.069 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.000 0.902
 TFPCH 1.155 0.975 0.883 1.044 0.976 1.047 1.080 1.008 0.762 1.191 1.009 0.965 0.952 0.982
Non-ferrous metals and products
 EFFCH 0.843 0.914 0.888 1.054 0.979 1.405 1.040 0.890 1.116 0.921 0.785 0.975 0.922 1.186
 TECHCH 1.009 1.098 1.076 1.086 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 0.979 0.902
 TFPCH 0.851 1.003 0.955 1.144 1.190 1.357 1.159 0.842 0.779 1.121 0.942 0.901 1.009 1.070
Fabricated metal and products
 EFFCH 1.014 0.982 0.858 1.090 0.870 1.067 0.977 0.994 1.265 0.870 0.802 1.094 0.935 1.092
 TECHCH 0.961 1.098 1.123 1.041 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.013 0.902
 TFPCH 0.974 1.078 0.964 1.134 1.057 1.030 1.088 0.941 0.883 1.059 0.963 1.010 1.024 0.985
Panel D: Low-tech industries
Food
 EFFCH 1.042 0.953 0.851 0.960 0.798 1.049 0.930 1.144 1.329 0.877 0.854 1.051 0.902 1.083
 TECHCH 0.961 1.098 1.126 1.039 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 0.941 0.902
 TFPCH 1.001 1.046 0.958 0.997 0.970 1.013 1.037 1.083 0.927 1.067 1.025 0.971 0.987 0.977
Beverages, Tobacco and Feed
 EFFCH 0.961 0.902 0.978 0.988 0.766 0.961 0.872 1.133 1.419 0.841 0.680 1.100 0.918 1.161
 TECHCH 1.009 1.098 1.077 1.085 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 0.949 0.902
 TFPCH 0.970 0.990 1.054 1.072 0.931 0.928 0.972 1.072 0.991 1.023 0.817 1.016 1.004 1.047
Textile mill products
 EFFCH 0.957 0.902 0.956 0.995 0.693 1.164 0.910 1.055 1.874 0.843 0.599 1.080 0.885 1.067
 TECHCH 0.961 1.098 1.120 1.041 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.000 0.902
 TFPCH 0.919 0.990 1.072 1.036 0.842 1.124 1.014 0.998 1.308 1.026 0.719 0.998 0.969 0.962
Lumber and wood products
 EFFCH 0.976 1.083 0.861 0.950 0.862 1.193 0.747 1.030 1.216 0.897 0.968 1.043 0.984 1.046
 TECHCH 0.961 1.098 1.126 1.039 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 0.999 0.902
 TFPCH 0.938 1.189 0.970 0.987 1.047 1.152 0.832 0.974 0.849 1.092 1.162 0.963 1.077 0.944
Furniture and fixtures
 EFFCH 0.967 0.942 0.963 1.003 0.798 1.094 0.885 1.066 1.223 0.872 0.973 1.082 0.900 1.067
 TECHCH 0.961 1.098 1.126 1.039 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.002 0.902
 TFPCH 0.929 1.033 1.084 1.042 0.970 1.057 0.987 1.009 0.854 1.061 1.169 1.000 0.985 0.963
Pulp, paper and paper products
 EFFCH 0.943 1.000 0.867 0.951 0.795 1.087 0.931 1.084 1.330 0.842 0.821 1.099 0.997 1.087
 TECHCH 0.999 1.098 1.087 1.076 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.002 0.902
 TFPCH 0.942 1.098 0.942 1.024 0.966 1.050 1.038 1.026 0.928 1.025 0.986 1.015 1.091 0.981
Printing and allied industries
 EFFCH 1.026 0.900 0.872 0.981 0.788 1.044 0.909 1.056 1.386 0.830 0.837 1.066 0.907 0.972
 TECHCH 0.961 1.098 1.121 1.045 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.000 0.902
 TFPCH 0.986 0.988 0.978 1.025 0.958 1.008 1.013 0.999 0.968 1.011 1.005 0.984 0.993 0.877
Leather tan., products and fur skins
 EFFCH 0.546 0.963 0.967 1.805 0.788 0.782 1.135 0.784 1.314 0.985 0.847 1.026 0.954 1.418
 TECHCH 0.961 1.098 1.126 1.039 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 0.954 0.902
 TFPCH 0.525 1.057 1.089 1.874 0.958 0.756 1.265 0.742 0.917 1.199 1.017 0.948 1.044 1.279
Miscellaneous manufacturing industries
 EFFCH 1.094 0.831 0.964 0.831 0.804 1.150 1.052 1.082 1.169 0.774 0.797 1.130 0.838 1.045
 TECHCH 0.963 1.098 1.113 1.058 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 0.999 0.902
 TFPCH 1.054 0.912 1.073 0.878 0.977 1.111 1.173 1.024 0.816 0.942 0.957 1.044 0.917 0.943
Ceramic, stone and clay products
 EFFCH 0.913 0.957 0.933 0.818 0.880 1.084 0.927 1.024 1.168 0.945 0.797 1.080 0.944 1.105
 TECHCH 0.981 1.098 1.096 1.070 1.216 0.966 1.115 0.946 0.698 1.217 1.201 0.923 1.094 0.902
 TFPCH 0.895 1.050 1.022 0.875 1.070 1.047 1.033 0.968 0.815 1.151 0.957 0.997 1.034 0.997
  1. EFFCH efficiency change, TEHCH technical change, TFPCH total factor productivity change
  2. *Cells with TFPCH  greater than unity shows total TFP growth as explained by corresponding efficiency change and technical change

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Aduba, J.J., Asgari, B. Productivity and technological progress of the Japanese manufacturing industries, 2000–2014: estimation with data envelopment analysis and log-linear learning model. Asia-Pac J Reg Sci 4, 343–387 (2020). https://doi.org/10.1007/s41685-019-00131-w

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Keywords

  • Efficiency
  • Productivity
  • Total-factor-productivity
  • Learning-by-doing
  • Technological learning
  • Manufacturing Industry

JEL Classification

  • D24
  • L60
  • O33