JAPAN'S ECONOMIC GROWTH AND FLUCTUATIONS BEFORE WORLD WAR II: A PERSPECTIVE ON RESOURCE ALLOCATION EFFICIENCY(in Japanese)

Economic growth was achieved by inputs of labor and capital, and by technological progress. Therefore, to achieve good economic performance, there can be no disturbances that impede free and efficient inputs of labor and capital in the market. Moreover, technological progress must be vigorous. Japan's economy prior to World War II attained sustainable growth, and experienced considerable economic fluctuations, including those during the so-called Showa Depression. There are various arguments on what caused the growth and fluctuations, but few attempts have been made to analyze them based on a neo-classical growth model. In the paper we explore how the economy was affected by disturbances in the prices of labor and capital, and by the change of total factor productivity, based on the idea of a neo-classical growth model. First, we calculated the marginal productivity of capital and of labor, solved the Euler equation, and substituted leisure and labor to select parameters so that they could reproduce real economic data. Second, we tried to find out which of two factors-inefficiency of resource allocation or change of TFP-caused the Showa Depression,. Focusing on wages in the 1930s, we calculated and analyzed how much labor input and production increased, unless there was no discrepancy between real wages and marginal productivity of labor. Third, we found that this increase of labor input did not, in general, worsen the utility of people, considering that leisure substitutes were not preferred in the 1930s. Finally, we considered what factors affected the inefficient allocation of labor and capital, and change of TFP over the total period before WWII. Concretely, we estimated the relation among the allocation efficiency, change of TFP, and various variables. The estimation results suggested that the changes were explained by the change in money supply.