Technology policy in Japan: A short review

This paper examines technology policy in Japan. Following a brief introduction, we review trends in Japanese technology policy: in the 1950's and through to the mid-1960's, the main policy concern was to facilitate the importation of technology. However, in the mid-1960's, the emphasis had shifted to promote domestic R & D, and various policy measures like tax breaks, subsidies and research contracts were employed to encourage R & D in private firms. In the 1970's, public policy became more selective, and R & D on pollution control, energy, space and ocean resources was encouraged. Currently, the policy discussion is centered around the problem of how to enhance Japan's technology base in basic technologies in order to promote a shift to high-technology production. The third section examines the various policy measures in detail; preferential tax treatment, subsidies, research contracts, low interest loans, public research institutions, public corporations, and research associations. It is argued that Japanese technology policy worked alongside market forces rather than replacing them with the political process. This approach was successful in the sense that it contributed to the promotion of technological progress and a high rate of economic growth. However, as the promotion of basic research becomes more important, a new approach must be devised. The brief concluding comments discuss current and future problems to be addressed by technology policy in Japan.     

Permanent income hypothesis: An optimal control theory approach to a classical macro thesis

This paper investigates the extent by which the permanent income hypothesis (the normal income and the proportionality hypotheses) can be obtained by the optimal control approach with an explicit recognition of individual's rational behavior over time.     

An antinomy in the theory of comparative advantage

This paper shows that the usual bilateral rule of comparing relative prices under autarky to determine the pattern of trade is not valid for the multicommodity world. In addition, equilibrium world price ratios need not fall between the corresponding price ranges under autarky. Such a paradox disappears under gross substitutability when the third commodity is a nontradeable. For the case of tradeables, an alternative bilateral rule to determine the pattern of trade is proposed. Since the classical constant cost case has been heavily discussed in the literature, we confine ourselves to the neoclassical case.     

Endogenous longevity,public debt and endogenous growth

This study explores the mechanism that causes an inverted U-shaped relationship between the public debt to GDP ratio and the economic growth rate which is observed in empirical studies. We show that this relationship is caused even when the government does not introduce the golden rule of public finance, and government health care expenditure has important role in generating this relationship.     

Business groups in a market economy

The purpose of this paper is to examine the nature and significance of the interfirm relationship called the business group. First, the nature of the Japanese business group is discussed. It is then pointed out that the business group is not a phenomenon unique to Japan, and an effort is made to explain the significance of the business group in the context of a market economy, using the Williamsonian approach to questions of internal organization and the market. Finally, the relationship between the input-output relationship of the firms and their group affiliation is tested.     

Mechanism design for a solution to the tragedy of commons

We consider the problem of the tragedy of commons in cooperative production economies, and propose a mechanism to resolve this tragedy, taking into account that the coordinator cannot perfectly monitor each agent’s labor skill and each agent may have an incentive to overstate as well as understate his own skill. Even in such a situation, the mechanism implements the proportional solution (Roemer in Soc Philos Policy 6:74–92, 1989 and Roemer and Silvestre in J Econ Theory 59:426–444, 1993) in Nash and strong equilibria when it is played as a normal form game. Moreover, the mechanism triply implements the solution in Nash, subgame-perfect, and strong equilibria when it is played as a two-stage extensive form game. We are greatly thankful to Semi Koray, William Thomson, and an anonymous referee of this journal for their concrete and helpful comments on improving the paper. An earlier version of this paper was presented at the annual meeting of the Japanese Economic Association held at Hitotsubashi University in October 2001 and at the Conference on Economic Design held at NYU in July 2002. We are grateful to Takehiko Yamato for his useful comments in the former conference. We are also thankful to Tatsuyoshi Saijo, Kotaro Suzumura, and Yoshikatsu Tatamitani for their kind comments.