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The conclusion of the article lists references that provide a wealth of detailed evidence supporting the points above, which this article can only begin to explore. The appendix reviews quantitative evidence concerning these points. The remainder of this article will expand on a number of the themes mentioned above.
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After 1945 a series of public policy reforms addressed inequality and erased much of the social bitterness around dualism that ravaged Japan prior to World War II. The capital intensive sector enjoying high ratios of capital to labor paid relatively high wages, and the labor intensive sector paid relatively low wages.ĭualism contributed to income inequality and therefore to domestic social unrest. Sharply segmented labor and capital markets emerged in Japan after the 1910s. Shifting out of low-productivity agriculture into high productivity manufacturing, mining, and construction contributed to total factor productivity growth. At the government level, industrial policy that reduced the cost to private firms of securing foreign technology enhanced social capacity.At the firm level, creating internalized labor markets that bound firms to workers and workers to firms, thereby giving workers a strong incentive to flexibly adapt to new technology, improved social capability.At the household level, investing in education of children improved social capability.The social capacity for importing and adapting foreign technology improved and this contributed to total factor productivity growth: In addition, companies moved down the “learning curve,” reducing unit costs as their cumulative output rose and demand for their product soared. Scale economies existed due to geographic concentration, to growth of the national economy, and to growth in the output of individual companies.
Scale economies - the reduction in per unit costs due to increased levels of output - contributed to total factor productivity growth. On the supply side, total factor productivity growth was extremely important. Total factor productivity growth - achieving more output per unit of input - was rapid.
Japanese growth was investment-led, not export-led.Rising domestic savings made increasing capital accumulation possible.Investment in manufacturing capacity was largely left to the private sector.Both private and public sectors invested in infrastructure, national and local governments serving as coordinating agents for infrastructure build-up. Investment-led growthĭomestic investment in industry and infrastructure was the driving force behind growth in Japanese output. Japan’s agricultural productivity was high enough to sustain substantial craft (proto-industrial) production in both rural and urban areas of the country prior to industrialization. Still, there are four distinctive features of Japan’s development through industrialization that merit discussion: The proto-industrial base Indeed Western Europe, Canada, Australia and the United States all attained high levels of income per capita by shifting from agrarian-based production to manufacturing and technologically sophisticated service sector activity. Moving along an income growth trajectory through expansion of manufacturing is hardly unique.
Japan achieved sustained growth in per capita income between the 1880s and 1970 through industrialization.
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