Published papers

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.

This study addresses two critical gaps in international energy cost competitiveness. The first is a frequency gap: conventional indicators such as the Real Unit Energy Cost (RUEC) are typically published with delays of 2–5 years, limiting their usefulness for timely policy evaluation. Here, both RUEC and the Real Price Level Index for energy (Real PLI)—the ratio of the Purchasing Power Parity (PPP) for energy to that for GDP—are measured with only a 2–3 month lag for nine countries—four in Asia, four in Europe, and the U.S. The second is a competitiveness gap that calls for policy re-sponses. Real PLIs indicate that the energy price disadvantages of Japan, Korea, France, Germany, Italy, and the UK have widened from about 1.8–2.9 times the U.S. level before the pandemic to 2.2–3.3 times by Q2 2025, with gaps also increasing rela-tive to China and India. Once country-specific thresholds are exceeded, output in en-ergy-intensive and trade-exposed (EITE) industries tends to contract disproportion-ately. These findings highlight that sustainable transitions require not only interna-tionally differentiated burden-sharing but also structural reforms to avoid persistent widening of energy price gaps. The Real PLI framework offers a timely competitiveness indicator and early-warning tool, signaling when growing asymmetries may under-mine policy feasibility.

This report presents the first comprehensive productivity analysis for the Maldives based on the newly developed Maldivian Productivity Accounts, covering the period 1970–2023 and including cross-country comparisons with SAARC members and Fiji. The results show that sustained economic growth of 5–7% per year from 1970 to 2019 was supported by a nearly thirtyfold expansion of capital input and a twentyfold increase in labor input, including migrant workers. However, improvements in TFP have remained close to zero or even negative. The capital–output ratio reached 5.3 in 2023—the highest in the SAARC region—reflecting low investment efficiency and possible overaccumulation. Transitioning from quantity-driven to efficiency-based growth is essential for the Maldives to achieve sustainable productivity and long-term economic resilience.

This chapter analyzes Bhutan’s productivity dynamics from 1990 to 2022, focusing on industry-level and aggregate total factor productivity (TFP) and capital and labor productivity. Hydropower plays a pivotal role in shaping Bhutan’s economic structure, driving substantial gains in labor productivity, especially after the commissioning of major plants. However, these gains have been offset by a capital productivity decline, leading to overall TFP growth stagnation. Despite hydropower’s importance in Bhutan’s economic expansion, its long-term contribution to TFP remains limited due to the capital-intensive nature of large-scale projects, which strains capital efficiency. The chapter also highlights productivity patterns in the non-electricity sector, where labor productivity gains are more prominent, but TFP improvements remain minimal. These findings emphasize the challenges of sustaining productivity growth in Bhutan’s hydropower-led economy and point to the risks of over-reliance on a single sector. A dual strategy is necessary: fostering internationally competitive industries that leverage hydropower while ensuring affordable and stable electricity supply to meet the expanding domestic demand. This approach is essential for achieving long-term sustainable economic growth.

This chapter constructs industry-level capital inputs for Bhutan from 1990 to 2022, addressing the absence of a capital stock account in the Bhutanese System of National Accounts (BTSNA). It develops time-series investment and stock matrices to create industry-specific, quality-adjusted capital inputs. A key methodological adjustment is the shift of hydropower investments from a work-in-progress basis to an installed basis, ensuring that only fully operational assets are included in capital services. Large-scale hydropower projects often experience time lags of over 10 years from construction to operation, so this adjustment is crucial for accurate productivity assessment. As of early 2022, Bhutan’s nominal net capital stock is estimated at Nu 905 billion, roughly four times its GDP—the highest ratio in South Asia. Despite being one of the most capital-intensive economies in the region since the 1990s, Bhutan’s capital inputs continued to expand rapidly, averaging 9.5% growth per year between 1990 and 2022. This rapid growth occurred not only in the electricity sector but also across non-electricity industries, with an even faster accumulation after the democratic transition in 2008. While data limitations remain, this study establishes a vital framework for understanding Bhutan’s capital dynamics and lays the foundation for future refinements.

This chapter compiles comprehensive labor data for Bhutan from 1990 to 2022, addressing the absence of consistent time-series estimates for the compensation of employees (COE) in the Bhutanese System of National Accounts. By constructing quality-adjusted labor input (QALI) across industries, the study identifies significant shifts in labor dynamics, particularly following democratization. Bhutan’s labor share remained consistently lower than India’s, experiencing a decline until the late 2000s, followed by an upward trend after the transition. From 2008 to 2022, aggregate hours worked grew modestly (0.14% annually), while labor input expanded by 3.13% annually, largely driven by a 2.99% annual improvement in labor quality. This improvement was primarily due to educational attainment, which accounted for 84.3% of the total gain. The chapter also emphasizes the limited role of the hydropower sector in direct employment despite its economic significance. Although data accuracy varies, this chapter provides a critical foundation for understanding Bhutan’s labor market dynamics and highlights challenges related to labor mismatches and the broader implications for sustainable development.

This chapter develops time-series Supply and Use Tables (SUTs) for Bhutan from 1990 to 2022, addressing challenges posed by data gaps and inconsistencies across various versions of the Bhutanese System of National Accounts (BTSNA). It emphasizes the importance of adopting consistent methodologies for assessing industry and product outputs, particularly in sectors like electricity, where pricing complexities and measurement issues are prominent. The official estimates, which are based on fixed-weight Laspeyres indices, tend to underestimate real value-added growth. By applying double deflation and chain indices based on the time-series SUTs constructed in this chapter, real GDP growth estimates for the post-democratization period (2008–2022) are revised, revealing an average revised real growth rate of 5.5%, 0.74 percentage points higher than the official figs. A notable shift in growth drivers is also identified: hydropower’s contribution to real growth decreased from 27.2% (1990–2008) to 14.1% (2008–2022). The manufacturing sector’s contribution also halved, suggesting potential signs of “Dutch disease.” The findings emphasize the need for further refinement in data to strengthen the analysis and lay the groundwork for a detailed productivity study in subsequent chapters.

This chapter comprehensively reviews Bhutan’s aggregate outputs from 1990 to 2022, focusing on expenditure-side GDP and hydropower-led growth. It reconciles multiple versions of the Bhutanese System of National Accounts (BTSNAs) to address inconsistencies and construct reliable long-term series for key indicators such as gross fixed capital formation (GFCF), exports, and imports. A key concern in constructing industry-level productivity accounts is investment, which in Bhutan is closely tied to imports. Ensuring alignment between final demand by product and investment measurement is crucial for accurate productivity analysis. The chapter highlights the significant role of hydropower in driving Bhutan’s nominal GDP growth, accounting for 34.0% of growth from 1990 to 2008 and 22.1% from 2008 to 2022. Bhutan’s high share of investment in GDP, which surpasses that of other South Asian nations and often exceeds China’s, is noteworthy. However, the capital-intensive model raises concerns about resource allocation efficiency and productivity improvements. This chapter lays the groundwork for a deeper understanding of Bhutan’s economic trajectory and future challenges, which will be explored in greater detail in the following chapters.

This chapter provides an overview of Bhutan’s hydropower-led economic growth, context, and challenges. The study aims to construct an industry-level productivity account from 1990 to 2022, analyzing hydropower’s impact on economic growth and resource allocation. Bhutan’s limited data availability and quality present challenges for developing an accurate industry-level productivity account, but also provide opportunities to adopt rigorous methods to address measurement issues. Although further analysis is necessary, the estimates for the overall economy and the two key sectors—electricity and non-electricity—are considered sufficiently reliable. Key findings include Bhutan’s exceptionally high investment ratio compared to other South Asian countries, the significant contribution of hydropower to economic growth, and stagnation in total factor productivity (TFP) despite rapid labor productivity growth. These insights highlight the complexities of Bhutan’s development model. The chapter concludes by outlining the book’s structure and guiding readers through the following detailed analyses. By offering nuanced insights into Bhutan’s economic trajectory, the study is a foundation for future research and informed policymaking.

The Bhutanese Productivity Account 2025 provides updated productivity estimates for 1990–2023, developed jointly by the DMDF and Keio University. While Bhutan’s hydropower-led growth model has achieved rapid labor productivity gains, the report reveals persistent stagnation in total factor productivity (TFP) and a steep decline in capital productivity. Capital input accounted for nearly 84% of GDP growth during this period, yet TFP contributed negatively on average, underscoring a pattern of capital accumulation without corresponding efficiency gains. The electricity sector, despite significant investment, saw long-term declines in TFP due to rising construction costs and limited output growth. Moreover, positive spillover effects to non-electricity industries have been limited, with manufacturing showing only modest improvements. International comparisons highlight a widening TFP growth gap between Bhutan and countries like India. Growing electricity demand from data centers and rising import dependency pose further challenges. The report emphasizes that Bhutan’s growth cannot be fully understood through labor productivity alone. To achieve sustainable, high-quality growth aligned with the 13th Five Year Plan, Bhutan must improve productivity in non-electricity sectors through investment in innovation, human capital, and structural reform, while addressing electricity supply constraints and maintaining macroeconomic resilience.

The current System of National Accounts (SNA) Gross Domestic Product (GDP) concept does not measure the income generated by the production sector since it includes depreciation and excludes capital gains and losses on assets used in the production sector. The paper suggests an accounting framework that measures the income generated by the production sector of an economy and implements this measure using the Augmented Productivity Database (APDB) developed by Asian Productivity Organization and Keio University for China over the years 1970–2020. Real gross and real net income generated by the Chinese production sector are decomposed into explanatory factors including TFP growth using the framework suggested by Jorgenson and Diewert and Morrison. TFP growth is further decomposed into technical progress and inefficiency components using the nonparametric approach developed by Diewert and Fox. The APDB has estimates for the price and quantity of agricultural, industrial, commercial, and residential land used in China. The paper argues that changes in land use should be treated in the same manner as inventory change and added to the alternative output measures. It turns out that Jorgensonian user costs for land are frequently negative. The problems associated with negative user costs are discussed in the paper.

This paper aims to measure and analyze the changes in international price differentials in comprehensive final energy consumption accompanying the recent energy price surges across seven major countries (Japan, China, South Korea, the U.S., the UK, Germany, and France). For measuring international price differentials, we employ not only the Price Level Index (PLI) for energy but also the Real Price Level Index (Real PLI), which accounts for the price differentials of outputs produced using energy inputs. Real PLI is an indicator independent of exchange rate fluctuations. Our preliminary estimates from January 2015 to December 2024 reveal the following observations. First, the US has maintained an overwhelming advantage in real energy price differentials even before the pandemic, with the other six countries bearing energy price burdens 1.8 to 2.2 times higher than the U.S. Second, while energy prices surged similarly across major countries during the global economic recovery from the pandemic beginning in early 2021, the real price differentials relative to the U.S. also expanded in five countries (excluding China) during the same period. These differentials widened to 2.3–2.7 times at their peak and continue to persist at 2.3–2.5 times the U.S. level. Third, China has significantly suppressed energy price increases during this period, particularly for coal and electricity, maintaining its price differential with the U.S. at nearly the pre-pandemic level. As the second Trump administration pursues energy dominance by expanding the use of inexpensive fossil fuels, further widening of energy price differentials and loss of international competitiveness are inevitable if Japan and European countries continue their current decarbonization policies. The Japanese economy should consider shifting toward policies aimed at reducing these international price differentials.

Since the late 2010s, when the signs of a full-scale acceleration of global decarbonization policies began to emerge, steel production in Japan and Germany has declined almost linearly. While this decline is generally attributed to weak domestic demand, understanding changes in domestic demand within the steel industry, which primarily produces intermediate goods, requires identifying the sources of final demand. This study examines recent trends in steel production decline while measuring structural changes in Japan's direct steel trade and indirect trade through downstream products in the postwar economy. In contemporary Japan, trends in domestic steel demand are heavily influenced by changes in indirect exports and imports, which are not readily observable in conventional statistics. Since the late 1980s, Japan’s indirect exports of steel have exceeded its direct exports. Additionally, the effective import dependence of steel (the sum of direct and indirect imports) has consistently increased since the late 1970s. Until around 1990, this rise was driven by an expansion in direct imports, whereas since the late 1990s, indirect imports have played a more significant role. If the acceleration of decarbonization policies further facilitates the offshore production of downstream products such as automobiles and machinery, the contraction of indirect steel exports and the expansion of indirect imports may lead to a self-reinforcing cycle of deindustrialization, exacerbating the decline in domestic production. Without considering indirect trade, such production decline risks being misinterpreted as merely a consequence of weak domestic demand.

Measuring benchmark production system, including secondary products, plays a crucial role in determining the accuracy of GDP. The purpose of this paper is to find a type of relationship between main activities (395 activities based on Japan Standard Industrial Classification) and secondary products (SDS 900 products) based on the Survey on Diversification of Sales (SDS) conducted in 201819 by the Research Institute of Economy, Trade and Industry. Understanding the production structure of detailed secondary products by main activity enables us to examine the accuracy of the benchmark production system in the Japanese System of National Accounts (JSNA). Our examination shows that 13.0 trillion yen of the domestic production of secondary products (6.3 trillion yen in GDP or 1.2% of GDP) is likely to be omitted in the 2015 benchmark production in JSNA.

The benchmark measurement of wholesale and retail outputs in Japan has been based mainly on the Census of Commerce, but since the 2011 benchmark year, it was switched to be based on the Economic Census, which was newly conducted in 2012. Our study investigates five benchmark years since 1995, the changes in the measurement framework have significantly impacted the quality of the Benchmark Input-Output Table, and the current benchmark estimates of wholesale and retail outputs are underestimated. The GDP shortfalls are estimated at 15.8 trillion yen (3.2% of the aggregate GDP) in 2011 and 11.3 trillion yen (2.1%) in 2015. This underestimation bias is a side effect of the overly decentralized nature of Japan’s statistical system. More integrated development of benchmarks and annual estimates is required in the Japanese System of National Accounts (JSNA).

This study constructs an industry-level productivity account for Bhutan's economy from 1990 to 2022, focusing on the impacts of hydropower development on economic growth and resource allocation efficiency. The analysis reveals that while hydropower has been the primary driver of Bhutan's economic growth, its contribution declined significantly post-democratization. Despite maintaining the region's highest capital investment, the economy shows a striking dichotomy between high labor productivity and low capital productivity, indicating fundamental limitations in Bhutan's hydropower-led development strategy.

This paper reports recent progress in measuring price level indices and productivity gaps for Japanese and U.S. industries between 1955 and 2015. Price competitiveness is driven mainly by monetary policies in the two countries, but productivity gaps reflect relative progress in technology at the industry level. Using our new measure of the price level, we find that Japan lost price competitiveness with the U.S. in the late 1980’s, following the Plaza Accord of 1985. Japan did not regain price competitiveness until 2015 in response to rapid depreciation of the Japanese yen by the Bank of Japan’s monetary policy of quantitative easing under Governor Haruhiko Kuroda. In this paper we discuss the conceptual issues involved, document the data requirements, and describe improvements in the data and methods since our earlier paper, Jorgenson, Nomura, and Samuels (2016). A major improvement results from new benchmark purchasing power parity (PPP) estimates for outputs and KLEMS inputs by industry for the year 2011. Productivity in the U.S. exceeded that in Japan for the entire postwar period. In the 1980s and the 1990s, however, manufacturing productivity in Japan overtook the U.S. by a substantial margin. Over that same period, the gap in non-manufacturing productivity diminished, but not at the same rate as in manufacturing. Between 1991 and 2015, U.S. productivity growth exceeded that of Japan in manufacturing. Because the gap in non-manufacturing productivity remained stable over the period, the overall productivity gap widened.

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.

我が国の最終エネルギー消費は、平成6年度の総合エネルギー調査会での長期エネルギー需給見通し作成の際に前提とされた1992年度の実績から、1996年度までに大きく変動を示している。1992年度総最終エネルギー消費が原油換算で360百万kL(うち産業用181百万kL、民生用93百万kL、運輸用86百万kL)から、1996年度には総計で393百万kLにまで伸びている。1990年実績349百万kLと比較しても、産業用で年率約1.0%、民生用約3.0%、運輸用約3.0%と予想を上回った伸びである。とりわけ、民生、運輸用の需要が堅調であり、産業用も製造業エネルギー多消費産業(鉄鋼、化学、窯業土石、紙パルプ)のエネルギー消費原単位が1990年を境に反転して増加傾向を示しているのが特徴である。1996年実績で、総最終エネルギー消費に占める産業用、民生用、運輸用シェアーはそれぞれ、49.6%、25.9%、24.5%となっており、民生、運輸の2者のシェアーが、産業用を上回ってきているという特徴もみられる。また1992年から1996年のGDP成長率が年率1.8%程度であり、その間、最終エネルギー消費が年率2.2%となっていることから、エネルギー消費のGDP弾性値は、1.26という値を示している。この伸び率は、平成6年の需給見通しで想定されていた2000年度の総エネルギー消費388百万kLを1996年度ですでに上回っていることとなり、2010年のCO2排出削減目標に向けてのエネルギー需給の根本的な見直しが必要となっている。別の言い方をすれば、経済成長率が年率2～3%程度で推移することを見込んで将来を見通した場合、2010年のC02排出量を1990年レベルに安定化させるためには、2010年度の総エネルギー消費を400百万kLまで年率で0.2%程度の伸びで1996年以降推移するというシナリオを描く必要がある。よってその間のエネルギー消費のGDP弾性は、0.2～0.3という小さな値を考えていることになる。C02の排出が大きく化石エネルギーの使用に依存していることは言うまでもない。したがって、ありうべき対策としては、一方で、化石エネルギーから非化石エネルギーへの転換を進めるとともに、他方で、産業、民生、運輸のあらゆる部門で、省エネルギー化を進めるということになろう。環境保全、経済成長、エネルギー安全保障の観点から、各種の対策が、国民経済にいかなる影響を与えるかを推察した上での、政策選択が必要とされる。本稿では、次節で多部門一般均衡モデルでのエネルギー需給についての概要とBaU(Business as Usual)ケースにおけるシナリオを記述する。第3節では、モデル体系内における炭素税賦課の影響の論理フローと若干の予備的考察をおこない、第4節において、我が国の環境保全政策に対応して各種C02排出削減シナリオが経済諸部門に与える影響についてシミュレーション結果を報告する。