Structural change and transformation of growth regime in the Japanese economy

Abstract

The purpose of this study is to empirically examine the relationship between structural change and economic growth in Japan during the past 40 years. Using growth in real value added and labour productivity as measurements of economic growth, we consider the structural change in value added as the structural change in output and that in capital and labour as the structural change in inputs. Specifically, we use the Japan Industrial Productivity database 2014 compiled by the Research Institute of Economy, Trade and Industry, and show (1) the pace of structural change in inputs and output, (2) the evolution of sectoral dispersion of economic performance, (3) the changing distribution of sectoral contribution to aggregate economic growth, and (4) empirical evidence of the relationship between structural change and economic growth. Our main conclusion is that since the 1990s, the Japanese growth regime has transformed from a regime with decreased heterogeneity and overall growth process to a regime with increased heterogeneity and an uneven growth process. In addition, there has been a positive impact of structural change in output on economic growth, although its magnitude has weakened since then.