Comments on Total Factor Productivity Changes in Japanese Small and Medium-Sized Enterprises in 1982–2016: Suggestive Indications of an IT Revolution?

Abstract

The paper measures total factor productivity (TFP) of Japanese manufacturing and service firms, most of which were small and medium-sized enterprises (SMEs), before and after the year 2000. The year was chosen as it was the timing around the implementation of the Basic Law for the Formation of an Advanced Information and Communication Network Society (2000), the launch of the e-Japan initiative (2001) and the rapid rise in information and communications technology (ICT) adoption among Japanese households and SMEs. By dividing the time around the year, the paper aims to measure the impacts of “ICT revolution” on productivity of Japanese firms. The paper finds that TFP rose across the studied sectors, although there was only slight improvement in some, such as finance and insurance, and leasing. It also found that ICT product manufacturing firms achieved much more productivity growth than those in the ICT service sectors did. The paper addresses an important issue, as TFP growth is the major source of economic growth in the long run. Thus, it is good news that Japanese firms in many sectors have achieved positive TFP growth. I am not convinced, however, that the source of the TFP growth could be attributed to ICT adoption and usage among Japanese firms, as appears to be claimed by the authors. This is because the paper tries to measure the impacts of the “ICT revolution” without using any variables directly related to ICT. This is like Hamlet without the prince! To make such a claim, the paper needs to include a variable that could proxy “ICT capital,” as in Jorgenson al. Otherwise, we cannot know what actually contributed to TFP growth as there were many important events around the year 2000 that could affect TFP. the of Information the of China to the WTO in 2001, the United States’ dot-com bubble burst in because TFP “technol-ogy,”