Productivity, Efficiency, Scale Economies and Technical Change: A New Decomposition Analysis
This paper aims to examine the productivity change of the Japanese economy using the data
pertaining to the 47 prefectures during the period 1981-2000. The decomposition analysis of the
Hicks-Moorsteen-Bjurek productivity index is conducted to explore the sources of the productivity
change. In summary, technical change and efficiency change are two of the most important
components driving procyclical productivity. We find that their relative importance varies over
periods. Supply shocks captured by technical change component caused upturns in productivity in
the mid and late 80s and in 1999 and 2000. Supply shocks also caused downturns in the early and
mid 90s. On the other hand, demand shocks captured by the efficiency change component drove
upturns of productivity in 1984, 1990, and 1996 when supply shocks were not detected.
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