Working Paper: NBER ID: w11749
Authors: Fumio Hayashi; Koji Nomura
Abstract: This paper constructs a multi-sector model to take explicit account of the very sharp change in the relative price between non-IT and IT goods. The model is calibrated to the Japanese economy, and its solution path from 1990 on is compared to Japan's macroeconomic performance in the 1990s. Compared to the one-sector analysis of Japan in the 1990s in Hayashi and Prescott (2002), our model does slightly better or just as well in accounting for Japan's output slump and does worse in accounting for the capital-output ratio. We also show that, to revive a 2% long-term growth in percapita GDP, Japan needs to direct 10% of private total hours to the IT sector.
Keywords: Japan; IT sector; macroeconomic performance; multisector model; labor allocation
JEL Codes: E2; O4; O5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Japan's output slump in the 1990s (F66) | multisector model accounts for Japan's output slump in the 1990s (O41) |
| labor allocation to the IT sector (J29) | long-term GDP growth (O49) |
| shift in labor allocation towards IT sector (J29) | long-run per capita GDP growth rate (O49) |
| labor allocation remains at year 2000 levels (J29) | long-run per capita GDP growth rate would only be 1% (O49) |
| 90% allocation in favor of the IT sector (L86) | growth rate of 2% (O40) |