Project Leader

YOSHIKAWA Hiroshi, Faculty Fellow

Sub-Leader

OKAZAKI Tetsuji, Faculty Fellow

Overview

To maintain Japan's economic vitality in the face of low fertility and aging population, it will be necessary to undertake comprehensive research on improving productivity and promoting technological innovation. Based on a keen awareness of such policy issues, this project is to analyze the mechanisms of economic growth from various angles. While existing studies of economic growth tend to be centered on Total Factor Productivity (TFP), this project will take in a broader range of themes from both experimental and peripheral studies. The project will also research the role of product innovation, an area with few prior empirical studies.

Major Research Results

RIETI Discussion Papers

• "Productivity Dispersion: Facts, Theory, and Implications" (AOYAMA Hideaki, YOSHIKAWA Hiroshi, IYETOMI Hiroshi and FUJIWARA Yoshi)
• "Corporate Investment and Uncertainty: An empirical analysis" (SHINADA Naoki)
• "Industrial Development, Firm Dynamics and Patterns of Productivity Growth: The Case of the Cotton-spinning Industry in Prewar Japan, 1894-1924" (OKAZAKI Tetsuji)
• "The Impact of Expectations of the Transfer of Agricultural Land to Other Uses on the Management Scale and Productivity of Rice Cultivation" (SAITO Keiji and OHASHI Hiroshi)
• "The Decline in Capital Utilization and TFP in the 1990s" (MIYAZAWA Kensuke)
• "The Impact of Deregulation in the Retail Sector: Implications for the aging society" (UNAYAMA Takashi and KEIDA Masayuki)
• "Why the Female Labor Force Participation Rate in Metropolitan Areas is Low: A reexamination of the current situation and of the issues" (HASHIMOTO Yuki and MIYAGAWA Shuko)

Project Leader

KOBAYASHI Keiichiro, Fellow

Overview

The purpose of this project is to develop a quantitative business-cycle model (macroeconomic model) for analyzing macroeconomic policies during a global financial crisis. The financial system, asset-based lending and other financial factors will be explicitly contained in the model. This model will be used in running simulations with an aim to contribute to the evaluation of macroeconomic policies. New attempts will also be made in the area of theoretical development. Specifically, search models and models containing market imperfection will be used in developing a new general equilibrium model for analyzing the impact of macro-stabilization policies. Furthermore, the project will consider Business Cycle Accounting (BCA), which it has been developing since fiscal 2005. To improve the usefulness of BCA, research will be conducted on the limitations of analytical methodology of BCA and possible ways for overcoming them. The post-Cold War pattern of global economic growth may be described as having derived its locomotive power from the financial sector-led U.S. economy that has consistently functioned as the "final consumer." But with the collapse of this pattern, global economic management will probably undergo major changes now in both practical and conceptual terms. In this context of change, this project will undertake broadly based studies and research on such issues as the future structures of global economic growth, the role of the East Asian region in this framework, and desirable directions in Japan's future economic and industrial structures.

Major Research Results

RIETI Discussion Papers

• "Nominal Rigidities, News-Driven Business Cycles, and Monetary Policy" (KOBAYASHI Keiichiro and NUTAHARA Kengo)
• "On Equivalence Results in Business Cycle Accounting" (NUTAHARA Kengo and INABA Masaru)
• "Monetization of Public Goods Provision: A possible solution for the free-rider problem" (KOBAYASHI Keiichiro and NAKAJIMA Tomoyuki)

Policy Discussion Papers

• "Index of Donor Performance (2006 Edition): Selectivity and Project Proliferation Reconsidered"TOGO Ken and WADA Yoshio

CEPR-RIETI Workshop

• "Labor Markets and the Macroeconomy: Theory, evidence and policy implications"

Project Leader

MOTOHASHI Kazuyuki, Faculty Fellow

Overview

To maintain economic vitality under conditions of low fertility and an aging population, Japan needs to achieve economic growth based on productivity growth. As the first step, it is important to conduct empirical analysis of the determinants of Total Factor Productivity (TFP). In this project, IT innovation is treated as a core factor among TFP determinants and empirical analysis is conducted, including international comparisons between Japan and the U.S. and Asian countries. Although Japanese firms have been actively investing in IT since the second half of the 1990s, it is reported that these investments have only had a limited impact on productivity. IT is utilized in a broad range of industries, particularly in the non-manufacturing sector, where IT constitutes a critically important complementary technology to the realization of business innovations. Therefore, promoting the effective use of IT can be expected to have a significant impact on macro-level developments in TFP. This project separates the affiliation between IT and productivity seen at the macro level into IT sector based innovation and IT enhanced productivity improvement and conducts an empirical analysis respectively.

Major Research Results

RIETI Discussion Papers

• "IT, R&D and Productivity of Chinese Manufacturing Firms" (MOTOHASHI Kazuyuki and YUAN Yuan)
• "Technology Spillovers from Multinationals to Local Firms: Evidence from Automobile and Electronics Firms in China" (MOTOHASHI Kazuyuki and YUAN Yuan)
• "How Does FDI in East Asia Affect Performance at Home?: Evidence from Electrical Machinery Manufacturing Firms "(MATSUURA Toshiyuki, MOTOHASHI Kazuyuki and HAYAKAWA Kazunobu)
• "Impact of the Debt Ratio on Firm Investment: A case study of listed companies in China" (YUAN Yuan and MOTOHASHI Kazuyuki)
• "The Software Industry's Multilayered Subcontracting Structure: Empirical analysis of innovation and productivity" (MINETAKI Kazunori and MOTOHASHI Kazuyuki)

OECD-METI-RIETI Conference

• "Innovation in the Software Sector"

Project Leader

ICHIMURA Hidehiko, Faculty Fellow

Sub-Leader

SHIMIZUTANI Satoshi, Consulting Fellow

Overview

As Japan experiences the aging of its society at a pace unprecedented worldwide, it is essential to build a sustainable social security system that ensures that the elderly do not suffer a decline in quality of life. Our research transcends the bounds of the traditional field-specific approach that addresses the health care, long-term care, and pension fields separately, and of simulation analysis with the use of macro models, and instead adopts a "new" microscopic yet comprehensive, market-oriented approach that is premised on the diversity of the elderly. Based on pilot studies already conducted in previous years, and with the intellectual support of the analogous studies of the elderly (the U.S. HRS [Health and Retirement Study], ELSA [English Longitudinal Study of Ageing] in the UK, and SHARE [Survey of Health, Ageing and Retirement in Europe] in Continental Europe), our research has inaugurated a world-standard panel study on population aged over 50. We are gathering data that is both multi-faceted, covering such aspects as health condition, economic situation, family relationships, employment status, and social participation, and that is also capable of international comparison. Our intention in doing this is to help ensure that "evidence-based policy-making" based on an abundance of microdata becomes an established feature in the sphere of social security policy in Japan, and that Japan's experience can be taken advantage of by other countries in their policy-making.

Project Leader

NAKAJIMA Tomoyuki, Faculty Fellow

Overview

Two types of risks exist in the economy. One is aggregate risk, which affects the entire economy, and the other is idiosyncratic risk that individual economic agents face. Because they can be fully insured, idiosyncratic risks do not pose a problem in the perfect financial market. However, in imperfect financial markets, idiosyncratic risks are significant factors that have to be taken into account in macroeconomic policies. The so-called "disparity problem" can be viewed as an issue generated by idiosyncratic risks in imperfect financial markets. The purpose of this project is to undertake theoretical and quantitative analysis of desirable macroeconomic policies in an environment where idiosyncratic risks exist.

Project Leader

TAKEISHI Emiko, Faculty Fellow

Overview

While firms have an important role to play in the realization of work-life balance (WLB) in Japan, the actual introduction of WLB-related measures by firms entails various problems and challenges. The purpose of this project is to examine these problems and consider the means necessary to facilitate the introduction of these measures. Specifically, the following matters will be examined:

• (1) Analysis of the cost-benefit structure of the introduction of WLB-related measures by firms;
• (2) Operational problems facing firms when introducing WLB-related measures and possible solutions; and
• (3) Challenges affecting initiatives for the establishment of WLB-related measures in the workplace and harmonization of work and life and the possible solutions.

The project will conduct an empirical analysis and evaluation of current conditions based on questionnaire surveys and hearings from firms and workplaces, while also referring to the corresponding systems and measures in various foreign countries. Having identified the relevant problems and challenges, the project will then attempt to develop necessary policy recommendations.

Project Leader

NAKAJIMA Tomoyuki, Faculty Fellow

Overview

As the global financial crisis persists, the gap in income and wage differentials in Japan and other countries continues to expand. While the labor system constitutes an important issue in income disparity, from a macroeconomic perspective, "market incompleteness" is also thought to be a major cause in the increasing disparity. This project examines how market incompleteness affects overall business conditions (through inefficiency in the labor markets) and considers the possibility that macroeconomic policies (stabilization policies) under conditions of market incompleteness can have a greater impact than previously assumed.

Project Leader

NAKATA Daigo, Fellow

Overview

The Japanese public pension system was revised in 2004, but this did not eliminate the public's skepticism concerning the sustainability of the system. Likewise, there has been no sign of any improvement in the public's faith in other social security systems, such as health and nursing care. One of the reasons for this is, the lack of public confidence in the financial projections for social security finance that are based on simulations of pension finances conducted by the Ministry of Health, Labour and Welfare. Lack of confidence has been augmented by limited opportunities to verify the Ministry's projections and run additional simulations based on different sets of assumptions. The purpose of this project is to examine the following three points, using an expanded version of the simulation model for pension finance (RIETI model) developed by the project leader:

• (1) Pension finance simulation analysis based on assumptions that are consistent with a general equilibrium approach;
• (2) Estimation of the base rate using microdata, and application of the base rate in re-evaluating proposals for the integration of pension systems; and
• (3) Development of a simulation model for very long-term projections of finances for pensions, health and nursing care.

Major Research Results

RIETI Discussion Papers

• "Impact of Greater Longevity on Pension Financing " (NAKATA Daigo and HASUMI Ryo)

Major Research Results

RIETI Discussion Papers

• "Overemployment: The structure, determinants, and countermeasures of involuntarily long work hours" (YAMAGUCHI Kazuo)

Books

• "Debates; Work-life Balance in Japan" (YAMAGUCHI Kazuo and HIGUCHI Yoshio)