Presentations

This presentation provides a comparative analysis of the role of information technology (IT) in economic growth in the United States and Japan, examining IT price indexes, capital input contributions, and productivity growth across major industries. The analysis begins by documenting the dramatic long-run decline in relative prices of semiconductors, computers, communications equipment, and software from 1960 to 2005, situating these trends within the framework of Moore's Law and the broader trajectory of the Information Age. It then decomposes the contribution of IT capital input — disaggregated into computers, communications equipment, and software — to economic growth in both countries, revealing notable differences in the pace and composition of IT investment between the U.S. and Japan. The presentation further examines total factor productivity (TFP) contributions at the industry level, covering IT-producing sectors as well as non-IT manufacturing, wholesale and retail trade, communications, and finance and insurance. Industry-level productivity growth and output growth are analyzed for both 1960–2000 and 2000–2004 sub-periods to capture structural shifts coinciding with the IT boom and its aftermath. Sources of economic growth — capital input, labor input, and TFP — and sources of average labor productivity growth — capital deepening, labor quality improvement, and TFP — are then decomposed for the full 1960–2004 period and compared across the two economies. The presentation concludes by outlining a new research agenda, addressing unresolved questions including the Solow Paradox, the valuation of intangible asset accumulation, widening wage inequality, and the long-run versus transitory contributions of IT and the semiconductor industry to economic growth.

This report examines the international comparison of energy cost competitiveness, emphasizing the importance of evaluating energy prices using a real price level index based on value-added prices (Real PLI) rather than nominal price differences that depend on exchange rates. Using data for nine economies—Japan, China, Korea, India, the United Kingdom, Germany, France, Italy, and the United States—measured through the fourth quarter of 2025, the analysis confirms that since the post-pandemic period the real energy price gap faced by Japan, Korea, and European economies relative to the United States, China, and India has structurally widened and become increasingly persistent. Japan’s Real PLI reaches 2.08 times that of the United States, while Germany’s reaches 2.73 times. The study further estimates a threshold effect whereby production in energy-intensive and trade-exposed (EITE) industries declines nonlinearly once the energy price gap exceeds a certain critical level. The recent improvement in measured energy productivity observed in advanced economies therefore reflects not only gains in technical efficiency but also significant structural change associated with the hollowing out of EITE industries. This dynamic implies the emergence of new risks for economic security in energy-dependent industrial economies.

The paper estimates a flexible functional form for a joint cost function using US aggregate data for the years 1970-2022. There are four outputs (consumption, government, investment and exports) and six inputs (imports, labour, machinery and equipment services, structure services, other capital services and land services). Curvature conditions on the joint cost function are imposed without destroying the flexibility of the functional form. Various elasticities of supply and demand are estimated along with technical progress bias terms for each input. When using aggregate time series data based on the System of National Accounts, the paper shows that it is probably better to estimate a joint cost function rather than a gross output function or a GDP function. The paper also shows that assuming that an aggregate production function has constant elasticities of substitution is not appropriate for the US. Finally, the importance of including land as an aggregate input is stressed.

We identify and measure two impacts of industry-level total factor productivity (TFP) growth on aggregate price change in the U.S. and Japan. The first is a standard effect from the definition of aggregate GDP. TFP change lowers aggregate prices ceteris paribus. The second is that a change in TFP in the production of investment goods lowers the cost of capital via lower investment prices. We call this the cost-of-capital effect and formulate an expanded growth accounting framework to capture both effects. We apply it to a harmonized dataset for the two countries and find that the standard effect has fallen since the peak around 2000 due to lower TFP growth and a diminished share of GDP. However, the cost-of-capital effect has risen in importance and offsets part of this decline in the standard effect.