QUANTITY OR QUALITY: THE IMPACT OF LABOUR SAVING INNOVATION ON US AND JAPANESE GROWTH RATES, 1960–2004*

This article deals with both theoretical and empirical analyses of the post‐war (1960–2004) growth for the USA and Japan. We investigated three factors contributing to growth: the growth rates of capital, labour and labour saving innovation. In Japan, the growth rate of the labour force has been much less important than its quality improvement—i.e. labour saving technical change—while in the USA, the growth rates of labour and population have contributed more than their quality improvement. The policy implication is that Japan's declining population can be compensated for by additional quality improvement of the existing labour force.