Working Paper: NBER ID: w12081
Authors: Fumio Hayashi; Edward C. Prescott
Abstract: The question we address in this paper is why the Japanese miracle didn't take place until after World War II. For much of the pre-WWII period, Japan's real GNP per worker was not much more than a third of that of the U.S., with falling capital intensity. We argue that its major cause is a barrier that kept agricultural employment constant at about 14 million throughout the prewar period. In our two-sector neoclassical growth model, the barrier-induced sectoral mis-allocation of labor and a resulting disincentive for capital accumulation account well for the depressed output level. Were it not for the barrier, Japan's prewar GNP per worker would have been close to a half of the U.S. The labor barrier existed because, we argue, the prewar patriarchy, armed with paternalistic clauses in the prewar Civil Code, forced the son designated as heir to stay in agriculture.
Keywords: No keywords provided
JEL Codes: E1; O1; O4; N3; N5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Labor barrier (F16) | Sectoral misallocation of labor (J29) |
| Sectoral misallocation of labor (J29) | Suppressed capital accumulation (P19) |
| Suppressed capital accumulation (P19) | Suppressed overall economic output (F69) |
| Labor barrier (F16) | Suppressed overall economic output (F69) |
| Removal of labor barrier (J68) | Increased overall productivity (O49) |
| Removal of labor barrier (J68) | Investment boom (E22) |