The effects of barriers to technology adoption on japanese prewar and postwar economic growth

Abstract

Following the start of modern economic growth around the end of the 19th century, Japan’s economy had substantially lagged behind leading economies before World War II, but achieved rapid catch-up – the growth miracle – after the war. To explain the patterns, we build a dynamic model and examine the role of barriers to technology adoption. We find that such barriers hampered catch-up in the prewar period and explain about one-third of the postwar miracle. Taking a historical perspective, we argue that factors that acted as the barriers include low capacity to absorb technology, economic and political frictions with the outside world, and a lack of sufficient competition.