NBER JapanProject 07 0626

The Industry Origins of the US-Japan Productivity Gap : The Industry Origins of the US-Japan Productivity Gap Dale W. Jorgenson (Harvard University) Koji Nomura (Keio University) Japan Project Meeting, June 26-27, 2007 Tokyo, Japan


Contents : Contents Relative Prices Industry PPPs for output and KLEM inputs Bilateral I-O Framework Hybrid Approach based on production-side data and demand-side data Economic Growth in the U.S. and Japan Level Comparison of ALP and TFP Industry Origins of TFP-gap Manufacturing vs Services


Relative Prices Required for Productivity Comparison : Relative Prices Required for Productivity Comparison Industry-Level PPPs for 42 US-Japan Common Industry Classification Gross Output: X Capital Service: K and Capital Acquisition: A Labor Service: L Energy: E Materials: M Bilateral I-O Framework used for defining PPPs for X, E, M, and A


US-Japan 42 Common Industry Classification : US-Japan 42 Common Industry Classification


Various Concepts of Relative Prices on Commodity : Various Concepts of Relative Prices on Commodity Producer’s Prices Domestic Output Price： Pdi Demand Price of Domestic Goods： Pd(H)i and Pd(I)i, where (H) and (I) represent Purchases by Household and Industry, respectively Demand Price of Composite Goods (inc. imports): Pc(H)i, Pc(I)i Purchaser’s Prices Demand Price of Domestic Goods： Ppd(H)i and Ppd(I)i Demand Price of Composite Goods (inc. imports): Ppc(H)i , Ppc(I)i PPPs for X, E, M, and A Pdi used for X, Pc(I)i for E and M, and Ppc(I)i for A


Bilateral I-O Framework in Measuring Relative Prices : Bilateral I-O Framework in Measuring Relative Prices Ⅰ. Construction of Price Model based on Bilateral Input-Output Framework Ⅱ. Describe the Linkages among Relative Prices based on the Price Model Ⅲ. One Data Sources ⇒All Relative Prices (e.g. Ppc(H)i ⇒ Pc(H)i ⇒ Pd(H)i＝Pd(I)i ⇒ Pdi ⇒ Pc(I)i ) Ⅳ. Comparison and Check in the case that multiple estimates will be available for one commodity


Bilateral Input-Output Table between Japan and US : JP US Freight & Insurance Duty RoW output Duty Value added JP US Export to RoW output Intermediate Demand Final Demand Bilateral Input-Output Table between Japan and US


Linkage of Relative Prices : Linkage of Relative Prices Domestic Price Linkages between Output and Input Pdi=fd(Pd(H)i , Pd(I) i ) ←consumption demand share of domestic goods Linkages between Domestic Price and Composite Price Pd(H)i=fH(Pc(H)i), Pd(I)i=fI(Pc(I)i) ←imports share, freight and insurance, duties Linkages between Producers Price and Purchasers Price Ppd(H)i=fdH(Pd(H)i), Ppd(I)i=fdI(Pd(I)i) Ppc(H)i=fcH(Pc(H)i), Ppc(I)i=fcI(Pc(I)i) ←wholesale and retail margin, transportation cost


Data Sources : Data Sources Japan-US Bilateral I-O Table in 1990 (METI) 164 commodities Import share & consumption share by commodity Freight & insurance rate by commodity(←supplementary table) Duties tax rate by commodity (←supplementary table) US Use-Table in 1987 and Japan X-Table in 1990 Wholesale and retail margin rate by 164 commodity Transportation margin rate(rail,road,water,air,other) by 164 commodity A Multitude of Data Source for Relative Prices  next page


Data for Relative Prices : Data for Relative Prices Ppc(H)i Ppc(H)i Ppdi Ppc(H)i Pdi Ppc(I)i Pdi Pdi Ppdi Ppci Ppc(I)i


PPP for Capital Inputs : PPP for Capital Inputs Common Classification for Asset Category 29 tangible assets 2 intangible assets: mineral exploration and software Inventories Land Measurement of PPPs for capital acquisition Based on purchaser’s price PPP for composite goods sold to industry Measurement of annualization factor Detailed tax system is considered in each country 59 assets in 36 industries in the U.S. 103 assets in 47 industries in Japan


PPP for Labor Inputs : PPP for Labor Inputs Common Classification for Labour Category industry: common 38 industries gender: male and female age: 6 groups (-24, 25-34, 35-44, 45-54, 55-64, 65-) class of worker: employee education: four groups(male), three groups(female) Totally, 1596 categories See Nomura and Samuels (2003)


Aggregate PPPs for KLEM: 1960-2004 : Aggregate PPPs for KLEM: 1960-2004


Industry Origins of PPP-for-GDP Gap in 1990 : Industry Origins of PPP-for-GDP Gap in 1990 PPP for GDP-output based=181.0 PPP for GDP-expenditure based=189.2 (OECD) Exchanger rate=144.8


Economic Growth in the U.S. and Japan : Economic Growth in the U.S. and Japan


Changes in Contribution of Industry TFP to Economic Growth:2000-2004 less 1995-2000 : Changes in Contribution of Industry TFP to Economic Growth: 2000-2004 less 1995-2000


U.S.-Japan Labor Productivity Gap : U.S.-Japan Labor Productivity Gap


U.S.-Japan TFP Gap : U.S.-Japan TFP Gap


Industry Origins of TFP Gap in 1990 : Industry Origins of TFP Gap in 1990


Industry Origins of TFP Gap in 2004 : Industry Origins of TFP Gap in 2004


TFP Level Comparison during 1960-2004 (1) : TFP Level Comparison during 1960-2004 (1)


TFP Level Comparison during 1960-2004 (2) : TFP Level Comparison during 1960-2004 (2)


Conclusion : Conclusion Labor Productivity Gap 65.7 in 2004 Lower TFP accounts for 57% Lower Non-IT-capital deepening accounts for 37% TFP Gap Period of Convergence: 1960-1990 Period of Divergence: 1990-2004 IT producing Industries during the late 1990s IT using industries after 2000 79.5 in 2004 Wholesale and Retail Trade emerged as the largest contributor to this gap, accounting for 25% of the lower TFP of the Japanese economy