Japan's Productivity and GDP Growth: The Role of Private, Public and Foreign R&D 1967-2017

T. H. W. Ziesemer*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We analyze the dynamic interaction of Japan’s total factor productivity, gross domestic product (GDP) domestic and foreign private and public research and development (R&D) in vector-error-correction models (VECMs) for Japan with data from 1963–2017. Extensive testing leads to favoring a model with five cointegrating equations for the six variables. Analysis of effects of permanent policy changes shows that (i) additional public R&D encourages private R&D and total factor productivity (TFP), and has higher internal rates of return than private R&D changes and therefore could speed up Japan’s growth; (ii) public R&D changes have a statistically significant positive permanent effect on foreign private R&D stocks and a transitional effect on foreign public R&D stocks; (iii) private R&D changes have a statistically significant positive permanent effect on foreign public R&D stocks and a transitional effect on foreign private R&D stocks; (iv) after a temporary GDP change, public R&D is counter-cyclical in the short and medium run and private R&D is pro-cyclical. Empirical results are related to the parameters of a VES (variable elasticity of substitution) function for TFP production.
Original languageEnglish
Article number77
Number of pages25
JournalEconomies
Volume8
Issue number4
DOIs
Publication statusPublished - Dec 2020

Keywords

  • public and private R&D
  • productivity
  • growth
  • spillovers
  • vector-auto-regression/error-correction (VAR/VECM)
  • DEVELOPMENT SPILLOVERS
  • UNIT ROOTS
  • LONG-RUN
  • INNOVATION
  • ELASTICITY
  • RETURNS
  • 1990S

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