Economic Growth of Japan and the United States in the Information Age

In this paper we compare sources of economic growth in Japan and the United States from 1973 through 2000, focusing on the role of information technology (IT). We have adjusted Japanese data to conform to U.S. definitions in order to provide a rigorous comparison between the two economies. The contribution of information technology to economic growth was strikingly similar in Japan and the United States in the last half of the 1990's. The growth rate of the Japanese economy declined drastically in the early 1990's, but revived modestly during the last half of the decade. In this period the share of the Japanese gross domestic product devoted to investment in computers, telecommunications equipment, and software rose sharply and the rate of total factor productivity growth increased. However, the contributions of labor input and other sources of growth in Japan lagged far behind those in the United States.