NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Can IT be Japan's Savior?

Fumio Hayashi, Koji Nomura

NBER Working Paper No. 11749
Issued in November 2005
NBER Program(s):   ITI   PR

This paper constructs a multi-sector model to take explicit account of the very sharp change in the relative price between non-IT and IT goods. The model is calibrated to the Japanese economy, and its solution path from 1990 on is compared to Japan's macroeconomic performance in the 1990s. Compared to the one-sector analysis of Japan in the 1990s in Hayashi and Prescott (2002), our model does slightly better or just as well in accounting for Japan's output slump and does worse in accounting for the capital-output ratio. We also show that, to revive a 2% long-term growth in percapita GDP, Japan needs to direct 10% of private total hours to the IT sector.

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Document Object Identifier (DOI): 10.3386/w11749

Published: Hayashi, Fumio and Koji Nomura. "Can IT Be Japan's Savior?," Journal of the Japanese and International Economies, 2005, v19(4,Dec), 543-567.

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