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Adjustment of Japanese Industrial Structure and Its Implication: An Explanation Based upon Endogenous Growth

서울대학교 지역종합연구소
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  • Economics
  • Political Science


Changes in industrial structure are caused by the different speed of productivity improvement in the process of production. Since the comaparative advantages are changing over time through the accumulation of human capital, each country has an incentive to change its comparative advantage towards high technology industries. Human capital accumulation is a social activity, and precisely, this characteristics of human capital provides an external effect in growth process. By this characteristics of human capital, sustained growth becomes possible through the optimization of each economic agent without exogenous shocks. Industrial policy which is based upon the dynamic comparative advantage is not always feasible. In Japan, since the differences in endowment of human capital stocks are relatively small compared to the advanced countries, the costs of government interventions are not so high in changing industrial structure. As a result, Japan could easily succeed in transforming her industrial structure into a more advanced way. Industrial policy of Japan indeed plays an important role in the sense that private sector by itself could not capture the benefits of the dynamic external effects.

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