Todai-Yale Initiative Lecture Series – On the Role of Policy Interventions in Structural Change and Economic Development: The Case of Japan’s Postwar

Todai-Yale Initiative Lecture Series -- On the Role of Policy Interventions in Structural Change and Economic Development: The Case of Japan's Postwar

Esteban-Pretel Julen - Faculty of Economics, University of Tokyo

Thursday, October 30, 2008 - 4:30pm to 6:00pm
Room 121, 8 Prospect Place See map
8 Prospect Place
New Haven, CT 6511

In this paper, we study the structural change occurred in Japan’s post World War II rapid economic growth era. We use a two-sector neoclassical growth model with government policies to analyze the evolution of the Japanese economy in the postwar period, and to assess the role of such policies. Our model is able to replicate the behavior in the data of the main macroeconomic variables for the postwar Japanese economy. Three findings emerge when we use our framework to analyze government policy interventions. First, price and investment subsidies to the agricultural sector and industrial policy, in the form of the Fiscal Investment and Loan Program, do not play a crucial role in the postwar rapid growth. Second, while a government subsidy to help families in the urban areas could have facilitated migration from agriculture to non-agricultural sector in the rapid growth era, such a policy does not improve the overall performance of the Japanese economy. Finally, with the counter-factual labor migration barrier, Japan’s postwar GNP growth would have been lower and the negative long-run level effect would be substantial.

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Japan