Project Leader

YOSHIKAWA Hiroshi, Faculty Fellow

Sub-Leader

OKAZAKI Tetsuji, Faculty Fellow

Overview

To sustain Japan's economic growth under conditions of a declining population, research on productivity growth and innovations is vital. The present project focuses on the role of product innovations which the standard growth accounting or measurement of total factor productivity (TFP) does not fully capture. We also study other neglected aspects of technical progress and innovations. The labor participation of women and working hours are also examined.

Major Research Results

RIETI Discussion Papers

• "Stock ownership and corporate performance in Japan: Corporate governance by institutional investors" (SHINADA Naoki)
• "Pension Benefit and Hours Worked" (MIYAZAWA Kensuke)
• "Agglomeration or Selection? The Case of the Japanese Silk-reeling Industry, 1909-1916" (ARIMOTO Yutaka, NAKAJIMA Kentaro and OKAZAKI Tetsuji)
• "Knowledge Spillover on Complex Networks" (KONNO Tomohiko)
• "A Stochastic Model of Labor Productivity and Employment" (FUJIWARA Yoshi and AOYAMA Hideaki)
• "Product Innovation and Economic Growth" (YOSHIKAWA Hiroshi, ANDO Koichi and MIYAKAWA Shuko)
• "Demand Driven Innovation and Uncertainty: Evidence from diffusion of flat panel TV" (UNAYAMA Takashi and KEIDA Masayuki)
• "Marriage Rate and Female Labor Participation Rate: Evidence from Japanese prefectural cross-section" (UNAYAMA Takashi)
• "Discrepancy between Saving Rates in SNA and Family Income and Expenditure Survey and Its Implications" (UNAYAMA Takashi)
• "A Study about the Job Training Expenditure of Japanese Firms in the 1990s" (SUGA Yutaka)
• "Changes of Industrial Structure and Post-war Economic Growth in Japan" (YOSHIKAWA Hiroshi and MIYAGAWA Shuko)
• "Simulation Analysis of Community Farming: Is there any room for growth in Japanese rice farming?" SAITO Keiji (The National Institute of Science and Technology Policy (NISTEP)), OHASHI Hiroshi (Faculty Fellow, RIETI) and NISHIMURA Kiyohiko (Bank of Japan)
• "Wages and Productivity in Firms using Foreign Trainees" HASHIMOTO Yuki (Graduate School of Economics, the University of Tokyo/Japan Soceity for the Promotion of Science (JSPS) )

Project Leader

KOBAYASHI Keiichiro, Senior Fellow

Overview

This project aims to develop a quantitative business-cycle model (macroeconomic model) for analyzing macroeconomic policies during a global financial crisis. Financial problems including those with the financial system and asset-based lending will be explicitly incorporated into the model. The goal of research is to contribute to the evaluation of macroeconomic policies by performing simulations with the model. As an attempt to develop new theories, search theory and monetary theory (particularly, the framework of Lagos and Wright) will be used to develop a new general equilibrium model capable of describing banking and financial crises. In addition, further research will be pursued on business cycle accounting (BCA) in an ongoing effort that began in fiscal 2005 (April 2005 through March 2006). In order to improve the usefulness of BCA as a practical analytical tool, research will be undertaken to explore its limitations and find possible ways for overcoming them. With the collapse of the post-Cold War pattern of economic growth, in which the financial sector-led U.S. economy continued to drive the global economy by serving as the ultimate consumer, global economic management is expected to undergo drastic changes in both practical and conceptual terms. In light of this prospect, this project aims to undertake broadly based research to explore possible future growth mechanisms for the global economy, thereby indentifying the role of East Asia in that framework and setting the direction for Japan in rebuilding its economic and industrial structures.

Research themes addressed by this project are broadly classified into the following four categories:

• I.   Development of a quantitative business cycle model and business cycle accounting (BCA)
• II.  Comparative weighing of financial stabilization policies derived from the banking crisis model and macroeconomic policies
• III. Policies in times of economic crisis and economic structural changes in times of transition
• IV.  Other related studies

Major Research Results

RIETI Discussion Papers

• "A Monetary Model of Banking Crises" (KOBAYASHI Keiichiro)
• "Quantitative Significance of Collateral Constraints as an Amplification Mechanism" (INABA Masaru and KOBAYASHI Keiichiro)
• "The Role of Investment Wedges in the Carlstrom-Fuerst economy and business cycle accounting" (INABA Masaru and NUTAHARA Kengo)
• "The Impact of Immigration on the Japanese Economy: A multi-country simulation model" (SHIMASAWA Manabu and OGURO Kazumasa)
• "Asset-Price Collapse and Market Disruption - A model of financial crises -" (KOBAYASHI Keiichiro)
• "How Were Monetary Polices Implemented before and after the Showa Depression? - Interpretation based on the Taylor Rule and the McCallum Rule -" (HARADA Yutaka and SATO Ayano)

Project Leader

MOTOHASHI Kazuyuki, Faculty Fellow

Overview

Productivity is essential in long term growth of Japan whose working age population is decreasing. In this study, the role of IT on productivity growth is identified by empirical analysis. It is found that the impact of IT on productivity in Japanese firms is smaller than that in U.S. firms. Both macro and micro level analysis is conducted in this project to investigate the reason why IT is under utilized in Japanase firms as compared to U.S. counterparts.

Major Research Results

RIETI Discussion Papers

• "Software Patent and its Impact on Software Innovation in Japan" (MOTOHASHI Kazuyuki)
• "A Two-dimensional Analysis of the Impact of Outward FDI on Performance at Home: Evidence from Japanese manufacturing firms" (OBASHI Ayako, HAYAKAWA Kazuo, MATSUURA Toshiyuki and MOTOHASHI Kazuyuki)
• "IT Innovation and Economic Growth: The importance of Moore's Law in productivity from a macro perspective" (MOTOHASHI Kazuyuki)

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.

Major Research Results

RIETI Discussion Papers

• "JSTAR First Results 2009 Report" (ICHIMURA Hidehiko , SHIMIZUTANI Satoshi and HASHIMOTO Hideki)

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.

Major Research Results

RIETI Discussion Papers

• "Optimal Monetary Policy with Imperfect Unemployment Insurance" (NAKAJIMA Tomoyuki)

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.

Major Research Results

RIETI Discussion Papers

• "Optimal Monetary Policy When Asset Markets are Incomplete" (R. Anton BRAUN and NAKAJIMA Tomoyuki)

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

MOTOHASHI Kazuyuki, Faculty Fellow

Overview

The innovation system in Japan is characterized as "in-house compartment style," but a shift to an "open innovation style" is becoming imperative in a world of stiff innovation competition due to technological progress and globalization. However, Japanese companies are still lagging behind their U.S. and European counterparts in this regard. In addition, it is important to take into account the differences in innovation processes across industries to analyze R&D collaborations. For example, the licensing of chemical compounds is important for pharmaceutical firms, while the formation of an "innovation ecosystem" is necessary for the electronics industry, in which the territory of products and business has become increasingly complex. Furthermore, in order to create an innovation system network where dynamic R&D collaborations are formed, the issue of how to promote high-tech startups bridging the "valley of death" between industry and academia is an important issue. This project endeavors to explain the process of "open innovation" in Japan through the quantitative analysis of patent datasets, licensing, and firm level performance.

Project Leader

YOSHIKAWA Hiroshi, Research Counselor, Faculty Fellow

Sub-Leader

UNAYAMA Takashi, Faculty Fellow

Overview

This project analyzes the impacts of low fertility and aging population on the Japanese economy, in particular from the aspects of economic growth, productivity, labor force, and prices.
Technological progress is widely acknowledged as the key to economic growth under low fertility and aging population. And although product innovations are particularly decisive, the measurement of total factor productivity (TFP), which focuses on the supply side and "value added," does not fully capture the impacts of product innovations on economic growth. This project researches product innovations both theoretically and practically. Additionally, productivity, human capital accumulation, household labor supply, and prices are also examined in the light of low fertility and aging population.

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

• "A Macrocounterfactual Analysis of Group Differences: An application to an analysis of the gender wage gap in Japan" (YAMAGUCHI Kazuo)
• "The Over-employment of Regular Employees and their Work-family Conflict" (YAMAGUCHI Kazuo)