Product Innovation and Economic Growth, Part II: The role of intermediate goods for product innovation

Author Name YOSHIKAWA Hiroshi  (Faculty Fellow, RIETI) /ANDO Koichi  (Development Bank of Japan Inc.) /MIYAKAWA Shuko  (Research Assistant, RIETI)
Creation Date/NO. March 2011 11-J-023
Research Project The Japanese Economy under Low Fertility and Aging Population: From the perspectives of economic growth, productivity, labor force, and prices
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Technological progress, especially product innovation, plays an important part in generating economic growth under the conditions of low fertility and an aging population. Technological progress is typically measured by growth accounting, that is, total factor productivity (TFP). The analysis of IT products measured by TFP is certainly important, but it does not provide the whole picture regarding the contribution of IT products to economic growth.

Based on our previous paper, this paper further explains the relationship between product innovation and TFP theoretically. To capture the wider picture of product innovation, Part II examines solar power and smart phones, both of which have shown remarkable demand-driven growth recently. Also, we discuss the role of intermediate goods for product innovation in a broad sense.