Discussion Paper Series 2007-E-1

A Neoclassical Analysis of the Postwar Japanese Economy

Keisuke Otsu

Two key features of the postwar Japanese economy are the delay of catch up during the 50s followed by rapid economic growth during the 60s and early 70s and the consistent decline in labor supply during the rapid growth period. A standard neoclassical growth model can quantitatively account for the Japanese postwar growth patterns of capital, output, consumption and investment taking the destruction of capital stock during the war and postwar TFP growth as given. The decline in labor can be explained by strong income effects caused by subsistence consumption during the rapidly growing period.

Keywords: Japanese Postwar Growth; Neoclassical Growth Model; TFP

Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.

Copyright © 2007 Bank of Japan All Rights Reserved.

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