Deborah Swenson: As developed-country TFP growth rates have declined in recent decades, macroeconomists and policymakers have been challenged to discover the economic fundamentals that could support a turnaround in productivity growth. Masahito Ambashi joins this quest by undertaking an intuitive and straightforward approach to the analysis of TFP growth: Annual TFP growth for industrial sectors in Japan between 1980 and 2008 are linked to data on industry-level competition, changes in R&D, and IT investment to output ratios in Japan. The results of this project reveal distinctions in determining factors over time as well as differences in the relationships for manufacturing as compared with non-manufacturing sectors. Based on Japan's experience, Ambashi points to the role of industry competition, and, to a lesser extent, incremental increases in R&D, as factors that influence subsequent industry-level TFP growth.
Although this project is constructed with care and considers a number of relevant TFP determinants, the...