It's Not Structural Change, but Domestic Demand: Productivity Growth in Japan

This paper examines the role of structural change in productivity growth in Japan, focusing on her recent "lost decades", with reference to the United States. Japan is now known to have a sharp slowdown in productivity growth in the 1990s, when we find a slowdown in intra-industry productivity growth is the main cause. We also find that the contribution of inter-industry reallocation of employment is almost zero in the 1990s and even significantly negative in the 2000s. Interestingly, the same holds true in the US, too. We will argue that structural change or the lack of it may not be responsible for the lost decades in Japan, and that these contrasting outcomes between Japan and the US come from a common factor.