The Depressing Effect of Agricultural Institutions on the Prewar Japanese Economy

Fumio Hayashi · Edward C. Prescott

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Economic Growth and Productivity Historical Economic and Social Studies Economic Theory and Policy

Abstract

Why didn’t the Japanese miracle take place before World War II? The culprit we identify is a barrier that kept prewar agricultural employment constant. Using a standard neoclassical two‐sector growth model, we show that the barrier‐induced sectoral distortion and an ensuring lack of capital accumulation account well for the depressed output level. Without the barrier, Japan’s prewar GNP per worker would have been at least about a half of that of the United States, not about a third as in the data. The labor barrier existed because, we argue, the prewar patriarchy forced the son designated as heir to stay in agriculture.

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References

2005Handbook of Economic Growth 1985Indivisible labor and the business cycle 2001The world economy: a millennial perspective 1980A Theory of Social Custom, of Which Unemployment May be One Consequence 1997The Neoclassical Revival in Growth Economics: Has It Gone Too Far?1988Indivisible labor, lotteries and equilibrium 1989NBER macroeconomics annual 1987 2005Accounting for cross-country income differences

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