Dual Structure and the Macroeconomy of Japan

Abstract

It goes without saying that the dual structure is a hallmark of Japan's production economy. It has attracted a great deal of attention in Japanese economic studies, especially in the historical context.1 Its theoretical underpinnings, however, do not seem to have been fully explored. In this article, we will approach the problem from the standpoint of a general equilibrium theory of economic growth. We will focus on the role which the dual structure plays in Japan's macroeconomy through a comprehensive review of price-wage and employment-output relationships. Based on this theoretical model, we will study changes which the dual structure has experienced over the last four decades.