Does government promote or hinder capital accumulation? Evidence from Japan' s high-growth era

Mariko Hatase and Yoichi Matsubayashi ()
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Mariko Hatase: Bank of Japan

No 1602, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: Governments occasionally intervene in private sector economic activities to promote specific industries and enhance economic growth. During Japan's high-growth era, the government used various policy tools to intervene in private sector capital investments. We examine the effects of these policy tools on capital accumulation. We employ firm-level data sets, identify policy actions using historical records and find that they were applied intensively to specific sectors and firms and that government intervention partially affected those firms f capital investment decisions. For some industries, such as steel, chemicals and textiles, investment-promoting policy tools resulted in accelerating capital investments or relatively higher resource allocations of capital to labour. There were also cases in which policy actions aimed at curbing investments resulted in slower investments or lower allocations of capital to labour, but the effects were weak and small. Discouraging policy tools had contradictory effects on some industries and enhanced capital investments. The latter phenomenon was observed when the government attempted to control private sector capital investments based on the current share of production or production capacities.

Keywords: capital accumulation; industrial policy; capital distortion; high-growth era (search for similar items in EconPapers)
JEL-codes: E22 N15 O25 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2016-02
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

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