Discussion Paper Series 2016-E-1

The Effects of Barriers to Technology Adoption on Japanese Prewar and Postwar Economic Growth

Daisuke Ikeda, Yasuko Morita

Following the start of modern economic growth around the mid-1880s, Japan’s economy continued to substantially lag behind leading economies before World War II, but achieved rapid catch-up after the war. To explain the patterns, we build a dynamic model and examine the role of barriers to technology adoption. We find such barriers hampered catch-up in the prewar period and explain about 40 percent of the postwar miracle. Taking a historical perspective, we argue that factors that acted as barriers include low capacity to absorb technology, economic and political frictions with the outside world, and a lack of competition.

Keywords: Japan; Barriers to technology adoption; Investment specific technology; Catch-up; Postwar miracle

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 © 2016 Bank of Japan All Rights Reserved.

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