Structural change and productivity growth in the japanese manufacturing industry

Abstract

This paper analyses the relationship between structural changes and productivity performances of the manufacturing sector in the Japanese economy, the primary driver of productivity growth in Japan that absorbs a large fraction of the labour force. Using the shiftshare analysis, we decompose the total labour productivity growth in Japan into two components: labour productivity growth and structural change across in the manufacturing sector to assess the interaction between them. The analysis provides greater detail on structural changes by classifying the manufacturing industries into four sectors according to the degree of technological sophistication: low-technology, medium-low-technology, medium-high-technology, and hightechnology. We found that the superior productivity performance in the Japanese economy takes place most notably in the medium-high-technology sector, as results of fundamental structural change occurred in the late 1990s. This has brought a shift in Japan's comparative advantage from lower-technology to higher-technology manufacturing. Finally, some implications will be discussed with respect to this empirical finding. © 2007 Institute of East and West Studies, Yonsei University, Seoul.