Productivity in Japan, the US, and the Major EU Economies:
Is Japan Falling Behind?

April, 2007

Kyoji Fukao
Hitotsubashi University and RIETI
Tsutomu Miyagawa
Gakushuin University and RIETI

1. Introduction
Following the collapse of the bubble economy in the early 1990s, Japan’s economic growthstalled: real GDP growth in the period 1995-2004 did not exceed 1.0%, which is considerably slower
than the 3.3% growth registered in 1973-1995 (based on data from the EU KLEMS Database, March
2007) and the lowest among the six major developed economies (the US, Japan, Germany, France,
the UK and Italy).
A frequently heard argument in Europe and the US is that the core countries of the EU, suchas Germany and France, have been falling behind the US in terms of increasing productivity. Inklaar
et al. (2006), for example, found that although the level of labor productivity in Germany, France
and the Netherlands was almost same as that in the US, total factor productivity (TFP) growth inthese countries since the mid-1990s has been much slower than in the US, especially in market
services. Similarly, van Ark et al. (2006) report that TFP growth in industries using information andtelecommunication technology (ICT-using industries) in the core EU countries since 1995 has beenmuch slower than in the US. Meanwhile, Stiroh (2002a) and Triplett and Bosworth (2002) report that
TFP growth in ICT-using industries in the US, such as communication, finance and commerce, has
accelerated substantially since 1995 and this acceleration represents the main engine of productivity
growth in the US economy.
The slowdown of Japan’s economic growth and the above mentioned studies comparing TFP
growth in the EU and the US raise the question whether Japan has a similar problem as the major EU
economies with regard to the introduction of ICT to market services. Yet, despite the importance of
this issue, there have been few studies which compare TFP growth and the impact of the ICT
revolution in the major EU economies, Japan and the US at the industry level – probably because of
the lack of appropriate data for a broad and rigorous international comparison.
In order to analyze this issue, researchers of the Japan Industrial Productivity Database Project,including the authors, have joined the EU KLEMS consortium and supplied original data on Japanfor the EU KLEMS database. The first public-release version of the EU KLEMS database isavailable online at the EU KLEMS website, <http://www.euklems.net/>. In this paper, using thisdatabase, we compare productivity growth and the accumulation of ICT capital by industry in Japan,
the major EU economies, and the US. We also use the results of the labor productivity comparison
project at the Japan Center of Economic Research.
The remainder of the paper is organized as follows. In Section 2, we present an overview ofthe pattern of economic growth and productivity improvement in Japan, the major EU economies,
and the US. We also compare the absolute labor productivity levels of these countries by industry. In
Section 3, we analyze the role of ICT investment on economic growth in these countries. It isfrequently argued that in order to fully realize the direct and indirect efficiency-improving effects of
ICT capital, the simultaneous accumulation of intangible assets, such as human capital and1organization capital, is indispensable. This issue is examined in Section 4. Section 5, finally, presents
our conclusions.

2. Overview of Economic Growth and Productivity Improvement in the Major EU Economies,
Japan and the US
We first compare the results of growth accounting for Japan, the major EU economies(Germany, France, the UK and Italy), and the US. Figure 1 shows the growth accounting results forthe market sector of these countries for the periods of 1980-95 and 1995-2004. The figure shows thatJapan experienced a severe downturn during the latter period and, of the countries considered here,
registered the highest annual rate of growth (3.6%) in 1980-95, but the lowest rate (0.7%) in
1995-2004. Germany experienced a mild slowdown in economic growth (from 1.9% to 1.1%).1 The
other four countries registered acceleration in economic growth after 1995. The average growth rate
for the four countries rose from 2.3% in 1980-95 to 2.6% in 1995-2004.

INSERT Figure 1

There is a stark difference in the causes underlying the acceleration in growth in France, theUK and Italy on the one hand and the US on the other. In the three EU countries, the acceleration ineconomic growth was mainly achieved through labor input growth. As Figure 2 shows, the increasein labor input growth in France and Italy did not take the form of improvements in labor quality butof increases in total hours worked. In contrast, in the case of the UK, the quality of labor input
improved substantially. Until 1995, these three countries suffered high unemployment rates,
especially among the less-educated young, but succeeded in creating jobs for these unemployed. The
average of the standardized unemployment rate of the three countries declined from 11.3% in 1995
to 7.4% in 2004. On the other hand, the standardized unemployment rate in Japan increased from
3.1% to 4.7% during the same period (OECD 2006). In contrast with the three EU countries justmentioned, the main cause of the growth acceleration in the US was an increase in TFP growth (from0.7% in 1980-95 to 1.6% in 1995-2004).

INSERT Figure 2

Turning to TFP growth in Japan and the four major EU economies, a similar slowdown can beobserved. Comparing the two periods, Japan’s average TFP growth rate dropped by 0.8 percent
points, from 1.2% in 1980-95 to 0.4% in 1995-2004. In the four major EU economies, the TFP
1

The EU KLEMS data on Germany for years before Germany’s unification include East Germany.
2growth rate also declined by 0.8 percent points, from 1.0% in 1980-95 to 0.2% in 1995-2004. Thus,
among the six major developed economies, the US is exceptional in the acceleration in TFP growth
it experienced.
Looking at the factors contributing to the slowdown in growth in the market sector of Japan’s
economy, the most important is the decline in the contribution of capital input growth. Of the 2.9
percentage-point decline in the growth rate of Japan’s market sector from the earlier to the latter
period, 42% was accounted for by the deceleration in capital accumulation. In contrast, in all of theother five countries, the contribution of capital input growth increased (Figure 3). In particular the
US and the UK experienced an acceleration in capital accumulation. As Figure 3 shows, this capital
deepening in the two countries was caused by the rapid accumulation of ICT capital.

INSERT Figure 3

To sum up the above analysis, it is not the gap in TFP growth but differences in factor input
growth that caused the large difference in the economic growth performance of France, the UK and
Italy on the one hand and Japan on the other in the period after 1995. The four major EU economies(Germany, France, the UK and Italy) and Japan experienced a slowdown in TFP growth of a similar
magnitude after 1995. Only the US accomplished an exceptional acceleration in TFP growth.
Figure 4 compares industry level TFP growth in the six countries before and after 1995. TFP
growth in the electrical machinery, post and communication sector was still highest in Japan among
the six economies after 1995. However, the problem for Japan is that, like in other countries, theshare of this sector in the economy overall is not very large. The average share of labor input (hours
worked) in this sector in Japan’s total labor input in 1995-2004 was 4.1%. In the US, this share was
3.3%. The largest declines in TFP growth in Japan occurred in distribution services (retail, wholesale
and transportation) and in the rest of the manufacturing sector (i.e., excluding electrical machinery).
The labor input shares of these two sectors were 23.4% and 16.8% respectively. The US and the
major EU economies except Italy recorded high TFP growth in these two sectors. Compared withGermany, France and the UK, Japan’s TFP growth in 1995-2004 was low in other goods- producing
industries (construction, mining, agriculture, fishery and forestry), but relatively high in finance andbusiness services. Except in France, TFP growth in personal and social services stalled in all thecountries examined here.

INSERT Figure 4

If a country’s productivity is at the world top level, then in order to accomplish further
productivity improvement, the country needs to innovate (Acemoglu et al. 2006) and to adjust her

3

economic structures to novel technologies. On the other hand, if a country’s productivity level lags
behind the world frontier, then the adoption of already existing technologies and improvements in
her resource allocation are probably more important. Inklaar et al. (2006) found that laborproductivity levels in market services in continental Europe were on par with the US in 1997, butsince then productivity growth in Europe has been much weaker, suggesting that the continental
European countries need to do more to innovate and adjust economic structures to novel
technologies. This observation raises the question: Is Japan in a similar situation as the continental
European countries?
Unfortunately, the EU KLEMS Database (March 2007 version) does not include data thatallow a comparison of productivity levels across countries. In this paper, we therefore use the resultsof a comparison of labor productivity conducted by the Japan Economic Foundation (JEF) and theJapan Center for Economic Research (JCER) (JEF-JCER 2007).2 The study compares 27 industries
covering the whole economy for the period 1980-2003 (1980-2002 in the case of Japan). The
JEF-JCER comparison of labor productivity for Japan, Germany, France, the UK and the US ismainly based on purchasing power parity (PPP) data for 1997 from the EU KLEMS Project, realvalue added and man-hour input data from the EU KLEMS 60-Industry Database, the Input-Output
Tables of the OECD STAN Database, and the Asian International Input-Output Table 2000 of theInstitute of Developing Economies.3 Differences of labor input quality across countries and overtime are not taken account of in the JEF-JCER labor productivity comparison. Basically the study
compares the real value added per man-hour after adjustments for absolute price differences.

INSERT Figures 5, 6, 7 and 8

Figures 5, 6, 7 and 8 show the results of the JEF-JCER study for 2002. In the case of thecomparisons between the US and European countries, the results are similar to those of Inklaar et al.
(2006). Productivity levels in Germany and France were very close to those in the US both in market
services and manufacturing, while productivity levels in the UK were lower than in the twocontinental European countries. In manufacturing sectors, productivity levels in Japan were on parwith those in the US, Germany and France (Figure 5). However, they were very low in comparison
with the three countries both in market services and other goods-producing industries. It therefore
seems that there is large room for improvement in Japan’s productivity in market services and other2

We would like to thank Ms. Reiko Suzuki of the JCER for helping us to gain access to the
JEF-JCER data and providing us with various valuable comments.
3
The JEF-JCER study also compared the labor productivity of China and the US and of Korea andthe US by industry. In addition to the above-mentioned data sources, the intra-Asian comparisons are
based on the PPP data of the International Comparison of Productivity Among Asian Countries(ICPA) Project conducted by the Research Institute of Economy, Trade and Industry (RIETI).
4

goods-production services through the adoption of already existing technologies and better resource
allocation.

3. The Role of ICT Investment in the Economic Growth of the Major EU Economies, Japanand the US
There are several studies which suggest that a main factor underlying the acceleration ineconomic growth in the US after the mid-1990s was an increase in ICT investment (Stiroh 2002a,
Triplett et al. 2002, van Ark et al. 2003). Given these results, other developed countries have started
to follow the US example and are promoting ICT investment. In this study, using data from the EU
KLEMS Database (March 2007), we examine the role of ICT investment in Japan and the major EU
economies.
The EU KLEMS Database defines ICT investment as investment in computing equipment,
communication equipment, and software. Figure 9 shows the growth paths of ICT capital service
inputs in the economy overall for the US, the four major EU economies, and Japan. ICT capital
service inputs are calculated based on the three types of ICT capital stock used in the EU KLEMS
definition.

INSERT Figure 9

From the viewpoint of ICT capital accumulation at the macro level, it seems that the six
countries can be divided into three pairs of countries. The front runners are the US and the UK,
which experienced a very rapid increase in ICT capital service inputs after 1995. Their capital
service input indices in 2004 are as much as four times as high as their 1995 levels. The next pairconsists of France and Germany. Their capital service inputs in 2004 were about 2.8 times greaterthan in 1995, meaning that capital service inputs in these two countries grew at 12% per annum from1995 to 2004. The last pair consists of Japan and Italy. ICT capital service inputs in 2004 in bothcountries were less than twice as high as their 1995 levels. Before 1995, the average growth rate of
ICT capital service inputs in Japan was second highest, trailing only behind the UK among the six
countries. However, investments in computers in the 1980s mainly consisted of main-frame
computers, and Japan’s low investment in capital service inputs during the latter period, likely to beat least partly the result of the long-term economic stagnation during the 1990s, suggests that firms
were unable to keep up with the rapid trend of computer downsizing and the mass introduction of
office PCs in the 1990s.
When we look at movements in ICT capital service inputs by industry, we find almost thesame trends as in the economy overall. The growth rate in ICT capital service inputs in Japan was
relatively low, particularly in service sectors such as distribution services and personal service5industries, as shown in Figures 10 and 11.

INSERT Figures 10 and 11

The impact of the accumulation of ICT capital on economic growth can be classified into two
types of effects. The first is the direct effect of capital accumulation. This can be measured by using
investment costs, since it can be assumed that cost minimizing investors will equalize the marginal
productivity of ICT capital services with their marginal costs. The second type is the indirect orexternal effects. An increase in ICT capital may enhance the efficiency of firms’ production
processes or engender a more efficient pattern in the division of labor in each industry and hence
accelerate TFP growth.
Table 1 shows the direct contribution of ICT capital to economic growth by industry. In the
US and the UK, the contribution of ICT capital increased in almost all sectors after 1995. In France,
the contribution of ICT capital service input growth increased in all sectors except personal andsocial services. In Germany, the contribution of ICT capital service input growth increased in all
sectors except two (distribution service and personal and social services). In contrast, in Japan and
Italy, there are many sectors where the contribution of ICT service input growth decreased after 1995.
In Japan, the contribution of ICT capital service input growth declined in all sectors after 1995,
while in Italy, it fell in all sectors except two (finance and business services and personal and social
services).

INSERT Table 1

We now turn to the indirect effect of ICT capital service input on economic growth based on
the fact that the introduction of ICT equipment raises the efficiency of business activities at the firmand industry-level and stimulates TFP growth. Across the six countries, we can observe a positive
correlation between ICT capital service input growth and TFP growth (Figure 12). For example, theUS enjoyed a high TFP growth rate coupled with a high growth rate in ICT capital service inputs,
while, on the other hand, in Japan and Italy, a low growth rate in ICT capital service inputs coexistedwith a low or negative TFP growth rate. We should note that based on Figure 12 alone we cannot say
anything about the direction of causality between ICT capital service inputs and TFP growth. Inorder to determine the direction of causality, we need to conduct formal econometric tests such as
those by Stiroh (2002b) or Miyagawa, Ito, and Harada (2004). However, the preliminary findings in
Figures 3 and 4 support the conjecture that ICT capital service input growth promotes economic
efficiency.

6

INSERT Figure 12

4. Intangible Assets as Complements to ICT Capital
According to several recent studies, it seems that in order to fully realize the direct andindirect efficiency-improving effects of ICT capital, the simultaneous accumulation of intangible
assets, such as human capital and organizational capital, is indispensable (van Ark 2004, Minetaki
2004, Bloom et al. 2006, and Kanamori and Motohashi 2006). We examine this issue in this section.
Van Ark (2004) emphasized that intangible assets played a complimentary role to ICT capitalin affecting productivity growth. In his study, he classified intangible assets that werecomplementary to ICT capital into five types: human capital, knowledge capital, organizational
capital, marketing of new products, and social capital (see Table 2).
With regard to these different types of intangible assets, the EU KLEMS Database provides
data on the accumulation of human capital. Human capital accumulation is usually measured by theshare of skilled labor in the economy. In the EU KLEMS Database, high-skilled labor is defined asworkers who graduated from university. If human capital enhances the direct effect of ICT capital,
the return to ICT capital will tend to be high in countries with higher human capital and suchcountries will have a more active accumulation of ICT capital. Figure 13 shows the share of highskilled labor input in total labor input in the US, the four major EU economies, and Japan. The figure
illustrates that the share of high-skilled labor inputs in all countries is on an upward trend, and shares
do not seem to converge to a certain level. The US has maintained the highest high-skilled labor
share among the six countries for the past 24 years, while Japan has maintained the second highest
share. Judging from this figure and our finding that ICT capital service input growth in Japan has
been stagnated since 1995, it seems that formal university-level education is not a key intangible
asset that enhances the accumulation of ICT capital.

INSERT Table 2 and Figure 13

Next, let us compare the accumulation of broader categories of intangible assets in developed
economies. Our comparison is based on preceding research, including our own (Fukao et al. 2007)
which estimated various types of intangible assets in developed economies using the methodology
developed by Corrado et al. (2005, 2006).
Intangible assets in Corrado et al.’s approach consist of three major categories: computerized
information, innovative property, and economic competencies. Computerized information consists ofsoftware, databases, etc. Innovative property includes scientific and nonscientific R&D, where thelatter refers to, for example, mineral exploitation, copyright and license costs, and other product7

development, design, and research expenses. Economic competencies include brand equity,
firm-specific human capital, and organizational structure.
Fukao et al. (2007) measured intangible investment in Japan using the above classification.
The results of Fukao et al. (2007), Corrado et al. (2006) on the US, and Marrano et al. (2006) on the
UK are summarized in Table 3. Intangible investment in Japan was about 40 trillion yen on average
from 1995 to 2002. The amount is equivalent to 7.5% of Japan’s GDP, a ratio that is smaller than thatin the US or the UK.

INSERT Table 3

Moreover, comparing the relative levels of intangible and tangible investment in Japan and theUS, other significant differences emerge. For example, Corrado et al. (2006) found that in the UnitedStates, intangible investment was 1.2 times the level of tangible investment. However, according toFukao et al. (2007), the ratio of intangible to tangible investment in Japan is only 0.3. The intangible
investment series estimated following Corrado et al.’s (2005, 2006) approach is one of the mostcomprehensive measures of the accumulation of intangible assets. According to this measure,investment activity in intangibles is less active in Japan than in the US and the UK, although there
are many high-skilled workers in Japan.4 The relatively low level of intangible investment may be agood candidate to explain why the accumulation of ICT capital and TFP growth stalled in Japan.

5. Conclusions
Using the recently released EU KLEMS Database (March 2007) and other statistics, we
examined whether Japan experienced similar problem as the major EU economies with regard to theintroduction of ICT to market services. The major results obtained through our analysis are follows:1.

It is not the gap in TFP growth but differences in factor input growth that underlie the large
difference in the economic growth performance of France, the UK and Italy on the one hand
and Japan on the other in the period after 1995. The four major EU economies (Germany,
France, the UK and Italy) and Japan experienced a slowdown in TFP growth of a similar
magnitude after 1995. The US was exceptional in accomplishing an acceleration in TFP growth.

2.

TFP growth in the electrical machinery, post and communication sector was still highest inJapan among the six economies after 1995. However, the problem for Japan is that, like in othercountries, the share of this sector in the economy overall is not very large. The largest declines

4

We should note that both ICT capital and intangible assets in Corrado et al.’s (2005, 2006)
definition include computer software. However, Japan’s sluggishness in intangible asset
accumulation cannot be explained by sluggishness in computer software investment, since comparedwith the US and the UK, Japan’s investments in innovative property and economic competencies
were small.
8

in TFP growth in Japan occurred in distribution services (retail, wholesale and transportation)and in the rest of the manufacturing sector (i.e., excluding electrical machinery). The labor
input shares of these two sectors were very large (23.4% and 16.8% respectively). The US andthe major EU economies except Italy recorded high TFP growth in these two sectors.
3.

In manufacturing sectors, productivity levels in Japan were on par with those in the US,
Germany and France. However, they were very low in comparison with the three countries bothin market services and other goods-producing industries. It therefore seems that there is large
room for improvement in Japan’s productivity in market services and other goods-production
services through the adoption of already existing technologies and better resource allocation.

4.

The US and the UK experienced a very rapid increase in ICT capital service inputs after 1995.
In contrast with this, in Japan, the contribution of ICT capital service input growth declined inall sectors after 1995. Across the six countries, we can observe a positive correlation between
ICT capital service input growth and TFP growth. This fact supports the conjecture that Japan’ssluggish growth in ICT capital service inputs is at least partly responsible for the slowdown inJapan’s TFP growth after 1995.

5.

According to several recent studies, it seems that in order to fully realize the direct and indirect
efficiency-improving effects of ICT capital, the simultaneous accumulation of intangible assets,such as human capital and organizational capital, is indispensable. Investment activity inintangibles is less active in Japan than in the US and the UK, although there are manyhigh-skilled workers in Japan. The relatively low level of intangible investment may be a goodcandidate to explain why the accumulation of ICT capital and TFP growth stalled in Japan.

9References

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and Economic Growth,” Journal of the European Economic Association, vol. 4, no. 1, pp.
37-74.
Ark, Bart van (2004) “The Measurement of Productivity: What Do the Numbers Mean?” in G.
Gelauff, L. Klomp. S. Raes, and T. Roelandt (eds.), Fostering Productivity, Elsevier,
Amsterdam.
Ark, Bart van, Robert Inklaar, and Robert H. McGuckin (2003) “ICT and Productivity in Europe andthe United States: Where Do the Differences Come from?” Economics Program Working
Paper Series, no. 03-05, The Conference Board, New York.
Bloom, Nick, Raffaella Sadun, and John Van Reenen (2006). "It Ain’t What You Do, It’s the Way
You Do IT: Investigating the Productivity Miracle Using the Overseas Activities of US
Multinationals," working paper, London: Centre for Economic Performance, London Schoolof Economics.
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Framework,” in C. Corrado, J. Haltiwanger, and D. Sichel (eds.), Measuring Capital in the
New Economy, The University of Chicago Press, Chicago,.
Corrado, C., C. Hulten, and D. Sichel (2006) “Intangible Capital and Economic Growth,” NBER
Working Paper No. 11948.
Fukao, K., S. Hamagata, T. Miyagawa, and K. Tonogi (2007), “Intangible Investment in Japan:
Measurement and Contribution to Economic Growth,” RIETI Discussion Paper Series,
forthcoming.
Inklaar, Robert, Marcel P. Timmer and Bart van Ark (2006) “Mind the Gap! International
Comparisons of Productivity in Services and Goods Production, Hi-Stat Discussion Paper
Series, no.175, Hitotsubashi University, Tokyo.
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Sangyo To no Seisan-sei no Kokusai Hikaku ni Kansuru Chosa Kenkyu Hokoku-sho [Reporton the Study of International Productivity Comparison in Machinery and Other Industries],
JCER, Tokyo.
Kanamori, Takahito and Kazuyuki Motohashi (2006) “Centralization or Decentralization of Decision
Rights? Impact on IT Performance of Firms,” RIETI Discussion Paper Series 06-E-032,
Tokyo.
Marrano, M. G. and J. Haskel, (2006) “How Much Does the UK Invest in Intangible Assets?”
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Minetaki, Kazunori (2004) “The Effect of Information and Communication Technology on the

10Japanese Economy,” Japanese Economy 32(1), 76-86.
Miyagawa, T., Y. Ito, and N. Harada (2004) “The IT Revolution and Productivity Growth in Japan,”
Journal of the Japanese and International Economy 18, 362-389.
OECD (2006) Economic Outlook, no. 80, Statistical Annex Tables, downloaded at
http://www.oecd.org/document/61/0,2340,en_2649_201185_2483901_1_1_1_1,00.html
on March 20, 2007.
Stiroh, K.J. (2002a) “Information Technology and the US Productivity Revival: What Do theIndustry Data Say?” American Economic Review 92(5), 1559–1576.
Stiroh K. J. (2002b) “Are ICT Spillovers Driving the New Economy?” Review of Income and Wealth48, 33-58.
Triplett, J.E. and Bosworth, B.P. (2002), “‘Baumol’s Disease’ Has Been Cured: IT and Multifactor
Productivity in U.S. Services Industries,” mimeo, available at:
http://www.brookings.edu/dybdocroot/views/papers/triplett/20020419.pdf)

11Figure 1. Growth Accounting for the Market Sector in Japan, the US, and the Major EU Economies
1995-04
4.0

3.5

3.5

3.0

3.0

2.5

2.5

-0.5
-1.0

Source: EU KLEMS Database, March 2007.

12

US 95-04-1.0

US 80-95-0.5

Italy 80-95

0.0
UK 80-95

0.0
France 80-95

0.5Germany 80-95

0.5

Italy 95-04

1.0

UK 95-04

1.0

1.5

France 95-04

1.5

Contribution ofcapital input
growthContribution oflabor input
growthGross value
added growth

2.0

Germany 95-04

2.0

Contribution of
TFP growth

Japan 95-04

annual average, %4.0Japan 80-95

annual average, %1980-95

Figure 2. Contribution of Labor Input Growth: Japan, the US and the Major EU Economies
1995-04
1.4

1.2

1.2

1.0

1.0

0.8

0.8

0.6

0.6

-0.6
-0.8

-0.4
-0.6
-0.8

Source: EU KLEMS Database, March 2007.

13

US 95-04-0.2

Italy 95-04

0.0
UK 95-04

US 80-95

Italy 80-95

UK 80-95-0.4

France 80-95-0.2

Germany 80-95

0.0

0.2

France 95-04

0.2

0.4

Germany 95-04

0.4

of which:Labor
compositionof which: Total
hours worked

Japan 95-04

annual average, %1.4Japan 80-95

annual average, %1980-95

Contribution oflabor input
growthFigure 3. Contribution of Capital Input Growth: Japan, the US and the Major EU Economies
1995-04
2.0

1.8

1.8

1.6

1.6

1.4

1.4

0.0
US 80-95

0.0
Italy 80-95

0.2
UK 80-95

0.2
France 80-95

0.4

Source: EU KLEMS Database, March 2007.

14

US 95-04

0.6

0.4

Germany 80-95

Contribution ofcapital input
growthItaly 95-04

0.6

0.8

UK 95-04

0.8

of which: ICT
capital1.0

France 95-04

1.0

1.2

Germany 95-04

1.2

of which: NonICT capital

Japan 95-04

annual average, %2.0Japan 80-95

annual average, %1980-95

Figure 4. TFP Growth in the Market Sector: by Sector and by Country

Manufacturing, excluding electricalmachinery

Electrical machinery, post andcommunication

2

3.5

8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0

3.0

1.5

2.5
1980-95
1995-2004

2.0

1

1.5

1980-95
1995-2004

1.0

-2.0

US

-4.0

Italy

-1.5

UK

-3.5

France-1.0Germany

-0.5

-3.0

Japan

-2.5

-1.0
-1.5
-2.0
-2.5

Source: EU KLEMS Database, March 2007.

15

US

US

Italy

UK

-0.5

France1980-95
1995-2004

Germany

0.0

0.5
0.0

Italy

0.5

1.0

-2.0

UK

1.0

1.5
1980-95
1995-2004

FranceItaly

UK

FranceUS

Personal and social services

Japan

2.0

US

0.0

Italy

2.5

UK

0.5

France3.0

Germany

3.5

1.0

Japan

-1

Distribution services

1.5

-1.5

-0.5

Germany-1.5

Germany

-1.0

Japan

US

Italy

UK

FranceGermany

Japan

-0.5

Japan

0

0.0

Finance and business services-1.0

1980-95
1995-2004

0.5

0.5

Other goods producing industries-0.5

Other goods-producing industries

1980-95
1995-2004

Figure 5. Labor Productivity: Japan-US Comparison

0

1

2

Economy overall
Agriculture, fisheries and forestry
MiningFood products
Textile products
Pulp, paper and wood products
Petroleum and chemical products
Stone, clay and ceramic products
Metals
Metal products
General machinery
Electric machinery
Precision machineryTransportation machinery
Miscellaneous manufacturing productsElectricity, gas and water supply
Construction
Wholesale and retail
Hotels and eating and drinking places
Transportation
Communication
Finance and insurance
Real estate
Other business services
Education
Medical services
Other services for individuals
Public services

Japan/US 1995
Japan/US 2002

Source: JEF-JCER (2007) .

16

3

Figure 6. Labor Productivity: Germany-US Comparison

0

1

2

3

Economy overall

Germany/US 1995
Germany/US 2002

Agriculture, fisheries and forestry
MiningFood products
Textile products
Pulp, paper and wood products
Petroleum and chemical products
Stone, clay and ceramic products
Metals
Metal products
General machinery
Electric machinery
Precision machineryTransportation machinery
Miscellaneous manufacturing productsElectricity, gas and water supply
Construction
Wholesale and retail
Hotels and eating and drinking places
Transportation
Communication
Finance and insurance
Real estate
Other business services
Education
Medical services
Other services for individuals
Public services

Source: JEF-JCER (2007) .

17

Figure 7. Labor Productivity: France-US Comparison

0

1

2

Economy overall

France/US 1995
France/US 2002

Agriculture, fisheries and forestry
MiningFood products
Textile products
Pulp, paper and wood products
Petroleum and chemical products
Stone, clay and ceramic products
Metals
Metal products
General machinery
Electric machinery
Precision machineryTransportation machinery
Miscellaneous manufacturing productsElectricity, gas and water supply
Construction
Wholesale and retail
Hotels and eating and drinking places
Transportation
Communication
Finance and insurance
Real estate
Other business services
Education
Medical services
Other services for individuals
Public services

Source: JEF-JCER (2007) .

18

3

Figure 8. Labor Productivity: UK-US Comparison

0

1

2

3

Economy overall

UK/US 1995
UK/US 2002

Agriculture, fisheries and forestry
MiningFood products
Textile products
Pulp, paper and wood products
Petroleum and chemical products
Stone, clay and ceramic products
Metals
Metal products
General machinery
Electric machinery
Precision machineryTransportation machinery
Miscellaneous manufacturing productsElectricity, gas and water supply
Construction
Wholesale and retail
Hotels and eating and drinking places
Transportation
Communication
Finance and insurance
Real estate
Other business services
Education
Medical services
Other services for individuals
Public services

Source: JEF-JCER (2007) .

19

Figure 9. Growth of ICT Capital Service Input in the Economy Overall
450

400

350

Japan
US

300

UK

250

France
Italy

200

150

100

50

0
_1
98
0
_1
98
1
_1
98
2
_1
98
3
_1
98
4
_1
98
5
_1
98
6
_1
98
7
_1
98
8
_1
98
9
_1
99
0
_1
99
1
_1
99
2
_1
99
3
_1
99
4
_1
99
5
_1
99
6
_1
99
7
_1
99
8
_1
99
9
_2
00
0
_2
00
1
_2
00
2
_2
00
3
_2
00
4

1995=100

Germany

20

Source: EU
KLEMS
Database,
March 2007.

Figure 10. Growth in ICT Capital Service Inputs in the Distribution Industry
450

400

350

Japan
US
UK
Germany
France
Italy

250

200

150

100

50

Source: EU
KLEMS
Database,
March 2007.

0
_1
98
0
_1
98
1
_1
98
2
_1
98
3
_1
98
4
_1
98
5
_1
98
6
_1
98
7
_1
98
8
_1
98
9
_1
99
0
_1
99
1
_1
99
2
_1
99
3
_1
99
4
_1
99
5
_1
99
6
_1
99
7
_1
99
8
_1
99
9
_2
00
0
_2
00
1
_2
00
2
_2
00
3
_2
00
4

1995=100

300

21

Figure 11. Growth in ICT Capital Service Inputs in Personal and Social Services
600

500

Japan
US
UK
Germany
France
Italy

300

200

100
Source: EU
KLEMS
Database,
March 2007.

0
_1
98
0
_1
98
1
_1
98
2
_1
98
3
_1
98
4
_1
98
5
_1
98
6
_1
98
7
_1
98
8
_1
98
9
_1
99
0
_1
99
1
_1
99
2
_1
99
3
_1
99
4
_1
99
5
_1
99
6
_1
99
7
_1
99
8
_1
99
9
_2
00
0
_2
00
1
_2
00
2
_2
00
3
_2
00
4

1995=100

400

22

Table 1. Direct Contributions of ICT Capital Service Input Growth to Economic Growth

1980-95
France Germany
0.3
0.9

Italy
0.2

UK
0.5

Japan
0.3

US
0.8

2.3

0.8

1.3

1.0

1.5

0.8

0.2

0.4

0.1

0.3

0.1

0.4

0.2

0.1

0.2

0.1

0.1

0.1

0.2

0.6

0.2

0.5

0.3

0.4

Finance and businessservices

1.6

1.0

0.7

2.2

0.5

Personal and social
services

0.3

0.2

0.5

0.6

0.0

Market sector total
Electrical machinery,
post and communication
Manufacturing,excluding electricalmachinery
Other goods-producing
industries
Distribution services

Japan
0.4

US
0.5

1.2

1.0

0.4

0.2

0.3

0.2

1995-2004
France Germany
0.5
1.0

Source: EU KLEMS Database, March 2007.

23

Italy
0.2

UK
1.0

2.7

0.2

2.7

0.3

0.5

0.1

0.5

0.2

0.2

0.1

0.0

0.1

0.1

1.0

0.3

0.8

0.2

0.8

1.0

1.2

1.2

1.0

1.8

0.7

1.8

0.4

0.2

0.4

0.0

0.5

0.3

0.5

Figure 12. TFP Growth and Growth in ICT Capital Service Inputs
2.0

20
18
TFP growth
Growth rate of ICT Capital Service Input

16
14

TFP growth rate (%)

1.0
12
0.5

10
8

0.0
Japan

US

FranceGermany

Italy

UK

6
4

-0.5
2
-1.0

0

24

Growth rate of ICT capital service inputs (%)

1.5

Table 2. Classification in Knowledge Capital(A) ICT capital(A1) Hardware(A2) Telecommunication infrastructure(A3) Software(B) Human capital（B1) Formal education(B2) Company training(B3) Experience(C) Knowledge capital（C1) Research and development and patents(C2) Lincenses, brands, and copyrights(C3) Other technological innovation(D) Organizational capital（D1) Engineering design(D2) Organizational design(D3) Structure in database and its use(D4) Remuneration of innovative ideas(E) Marketing of new products ('customer capital')(F) Social capital
Source: van Ark (2004).

25

_1
98
0
_1
98
1
_1
98
2
_1
98
3
_1
98
4
_1
98
5
_1
98
6
_1
98
7
_1
98
8
_1
98
9
_1
99
0
_1
99
1
_1
99
2
_1
99
3
_1
99
4
_1
99
5
_1
99
6
_1
99
7
_1
99
8
_1
99
9
_2
00
0
_2
00
1
_2
00
2
_2
00
3
_2
00
4

%

Figure 13, Share of High-Skilled Labor Input in Total Labor Input

35

30

25

20

15
Japan
US
FranceGermany
Italy
UK

10

5

0

26

Table 3. Intangible Asset Investment: Japan, the US and the UK

Computerized information
Custom software
Packaged software
In-house software
Databases

Japan

US

UK

(billion yen)(billion US
dollars)(billionpounds)(1995-2002) (1998-2000)
9,714
154
5,663
449
2,708
151
894
3

(2004)
19.8
7.5
12.4

Innovative property
Science and engineering R&D
Mineral exploration
Copyright and license costs
Other product development,
design, and research expenses

18,133
9,634
40
4,659

424
184
18
75

37.6
12.4
0.4
2.4

3,801

149

22.4

Economic competencies
Brand equity
Firm-specific human capital
Organizational structure

12,899
4,774
1,600
6,525

505
140
365

69.3
18.5
28.5
69.3

Total

40,746

1085

126.7

7.8

11.7

10.9

0.3

1.2

Intangible investment /GDP(%)
Intangible investment/tangible
investment27