Estimation Procedures and TFP Analysis of the JIP Database 2006 Provisional Version

(Introduction) The purpose of this paper is to explain the preliminary version of the newly compiled Japan Industrial Productivity Database (JIP 2006) and report some results of our growth accounting analysis based on this database. The JIP 2006 contains information on 108 sectors from 1970 to 2002 that can be used for total factor productivity analyses. These sectors cover the whole Japanese economy. The JIP Database was compiled as part of the RIETI (Research Institute of Economy, Trade and Industry) research project "Study on Industry-Level and Firm-Level Productivity in Japan." The original version of the JIP Database (ESRI/Hi-Stat JIP Database 2003) was compiled in a collaboration between ESRI (Economic and Social Research Institute, Cabinet Office, Government of Japan) as part of its research project on "Japan's Potential Growth" and Hitotsubashi University as part of its Hi-Stat project (A 21st-Century COE Program, Research Unit for Statistical Analysis in the Social Sciences). The authors are grateful to ESRI and members of the Hi-Stat team for the support and cooperation provided for our present RIETI project. At this moment, the major data available are sectoral capital service input indices and labor service input indices, including information on real capital stocks and the nominal cost of capital by type of capital and by industry, the nominal and real values of sectoral gross output and intermediate input, as well as some supplementary tables, such as statistics on trade, inward and outward FDI, and Japan's industrial structure. All real values are based on 1995 prices. For growth accounting, nominal labor costs and nominal capital services for 108 industries are also estimated. The sum of these two values for each industry is not adjusted to be equal to the value added of that industry at factor cost base. The final version of the JIP 2006 is scheduled to be released by November, 2006. The final version will include nominal and real annual input-output tables, detailed information on ICT capital services and some additional statistics, such as R&D stocks and capacity utilization rates at the detailed sectoral level. For scholars familiar with the JIP 2003, we here briefly summarize the main differences between and the main similarities of the 2006 and 2003 versions of the JIP. 1. The JIP 2003 is based on the 1968 SNA, while the JIP 2006 is based on the 1993 SNA. The capital stock of the JIP 2006 includes order-made software, plant engineering, and assets accumulated by the search for minerals. The JIP 2003 uses SNA statistics as control totals. Following Japan's present SNA statistics, capital stock in the preliminary version of the JIP 2006 does not include prepackaged and in-house software. However, the final version of the JIP 2006 will include two sets of statistics, one in which capital stock does not include prepackaged and in-house software and one in which it does. 2. In the case of the JIP 2006, labor input data include detailed information on labor input cross-classified by categories of labor. The paper is organized as follows: In the next section, we report the estimation procedures of our annual input-output tables. In Sections 2 and 3, we explain the capital service input data and the labor input data of the JIP 2006, respectively. Finally, in Section 4, we analyze Japan's sectoral and macro TFP growth.