Changes of Industrial Structure and Post-war Economic Growth in Japan

Author Name YOSHIKAWA Hiroshi  (Research Counselor) /MIYAGAWA Shuko  (Research Assistant, RIETI)
Creation Date/NO. September 2009 09-J-024
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In the process of economic growth, changes of industrial structure play an important role. According to Aoki and Yoshikawa (2002), the asymmetry exists between "old" industries and "new" industries depending on different growth rates of demand. When new goods or new sectors are created, demand rapidly grows initially, but eventually hits a ceiling over the course of time. Basically, this S-shaped growth is due to the pattern of demand growth and its saturation. It suggests that the basic factor that restrains economic growth is the saturation of demand for existing goods and services. The ultimate factor that generates economic growth is the creation of new goods and sectors. It is assumed that goods, industries, and sectors created by "demand creation"-type innovations have different product life histories. In this framework, this paper analyzes the economic growth in Japan during a half-century following WWII. We analyze the changes of industrial structure with help of the "skyline diagrams," and an international comparison is also made.

Economic growth in which all industries grow in a uniform way does not exist in reality. Economic growth accompanied by large variability among industries brings about changes in the industrial structure as a result. The growth rate of an economy in which the industrial structure could shift smoothly to "growing industries," with vigorous technological development and high income elasticity of demand, must be high. The differences between growing industries and declining industries arise from dynamic changes in technology and demand. When considering economic growth in a society with low birthrate and aging population, we should not forget that smooth transformation of industrial structure would lead to an increase in the total factor productivity (TFP). The changes of industrial structure are the key issue for economic growth in a society with a low birthrate and an aging population.