Japan's Economic Growth and Information Network Industries: Can IT Make It?

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The major result of recent empirical studies related to the impact of infoormation technology on economic growth has been the sure knowledge that lnformation technology has contributed to the surge in productivity and its consequent economic growth witnessed in the U.S. since the mid-1990s. A driving force to that radical change in the U.S. has been the massive investment in information technology since the early 1990s. As a result, the popular belief in the “Solow paradox,” derived from Solow’s famous quip, “You can see the computer age everywhere but in the productivity statistics,” has disappeared. lnstead, an undisputed acknowledgement of the “new economy” has taken root in the U.S. Japan, in contrast, experienced its “lost decade” in the 1990s, when business investment was sluggish and the economy grew at only 1.3 percent annually. The matter in question in this contrast between Japan and the U.S. is whether Japan’s investment in information technology has contributed to its economic growth, and how information network industries,the dynamo of the ‘new economy, have performed in the Japanese economy over the last few decades. To address these questions, we first measure Japan’s economic growth and the contribution of information technology based on Solow’s growth accounting method. Then, we outline the periodic changes in Japan’s productivity and IT investment to analyze whether both, the new economy as well as the “Solow paradox,” have been true for Japan. We also investigate information network industries to elucidate the reasons for and causes of Japan’s stagnant economic performances in the era of the “new economy.” Through these analyses, we consider the feasibility of a resurgence in Japan’s economic growth in the era of the information technology revolution.
Original languageEnglish
Pages (from-to)91-124
Number of pages34
JournalInternational Journal of Public Affairs
Publication statusPublished - Mar 2009

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)


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