Abstract
This study examines the relationship between structural change, sectoral disparity, and economic growth in the Japanese economy. Structural change in this study refers to change in the sectoral composition (share) of an aggregate economy. Sectoral disparity is measured by the sectoral contribution to economic growth and the sectoral difference in the levels of value added and labour productivity. In this study, therefore, we use a disaggregation approach and divide the macroeconomy into sectors based on the Japan Industrial Productivity Database of 2014 (JIP database hereafter) compiled by the Research Institute of Economy, Trade and Industry (RIETI). The disaggregation approach is important because, as we see below, sectoral performances such as growth rates and levels of labour productivity and value added are not always uniform among sectors. Thus, sectoral heterogeneity is evolving in Japan.
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- 1.
Further, the final demand by sector in the JIP database input–output table is also suitable to capture the demand side dynamics. However, since some data on demand components are unavailable, we cannot conduct the statistical analysis smoothly. Therefore, we employ value added to capture the demand side of the economy. For the statistical processing relationship between value added and final demand, see the JIP database website of RIETI.
- 2.
The original data for value added generates outliers in these indices for 1982 and 1983. This is because the sector of electronic equipment and electric measuring instruments (no. 50) takes a value (6470,7985 million) in 1982 that may be an outlier. Therefore, we changed this value and plotted it by smoothing its value with the 5-year average.
- 3.
Prasad (1997) also uses the Lilien index to capture the degree of the structural change in labour productivity and documents that the Japanese economy underwent gradual structural change in this term until the beginning of the 1990s.
- 4.
The log variance measures the degree of inequality in the economic outcomes. This has the advantage of explaining the source of the change in inequality by decomposing it into within-group effects (dispersion effect within each group) and between-group effects (dispersion effect between different groups). A rise (fall) in this variable means that dispersion is increasing (decreasing).
- 5.
With regard to labour productivity decomposition, the current method also follows Syrquin (1988). Aggregate labour productivity per man-hour y is defined as y = ∑ y is L, i, where y i is sectoral labour productivity per man-hour and s L, i the sectoral share of man-hours. The increment in labour productivity is as follows:
$$ \Delta y=\sum \limits_i{\Delta y}_i{s}_{L,i}+\sum \limits_i{y}_i{\Delta s}_{L,i} $$The growth rate of labour productivity at the macroeconomic level is then obtained by dividing both sides by y,
which is
$$ \frac{\Delta y}{y}=\sum \limits_i{s}_{L,i}\left(\frac{{\Delta y}_i}{y}+\frac{\Delta {s}_{L,i}}{s_L}\bullet \frac{y_i}{y}\right) $$where the first term in parentheses represents the ‘within effect’ and the second term represents the ‘between effect’ (Baily et al. 1992; Krüger 2008). Therefore, aggregate productivity growth can be decomposed into within-sector growth in labour productivity and the sectoral shift in share of man-hours.
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Nishi, H. (2018). Structural Change, Sectoral Disparity, and the Economic Growth Process in Japan. In: Boyer, R., Uemura, H., Yamada, T., Song, L. (eds) Evolving Diversity and Interdependence of Capitalisms. Evolutionary Economics and Social Complexity Science, vol 11. Springer, Tokyo. https://doi.org/10.1007/978-4-431-55001-3_15
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