Industry (Economic)-wide Learning: A Comparative Study of Manufacturing and Non-manufacturing Sector in Japan

Abstract

In knowledge economies, building technological capability is a continuous process, and as well as unarguably key to industrial policy development. Industry (economy)-wide learning has been linked to reduction in unit labor cost and overall production cost of goods and services. In this study, we comparatively studied the learning pattern of Japanese manufacturing and service sector using industrial-level-data. This study is perhaps the first attempt to study the productivity of Japanese Industry using learning curve at the aggregate level. Looking back to almost 4 decades long (1980-2017) of financial data on input-output, we estimated the trend in technological learning using various models and thereafter calculated the annual progress ratios (via production function imputed in log linear & cubic model) and revealed the dynamic technological learning across the sectors at the aggregate level. This enabled us to identify years with good learning rates which is synonymous to cost saving across the two sectors of the economy. The results show that, while learning was restored and sustained in the service sector of the economy in the last decade, the same cannot be said about manufacturing sector where learning (cost-saving ability) was completely lost. We conclude that (1) as typical of advance economy, Japan is now service-oriented economy with manufacturing playing a complimentary role, (2) the service sector seems to have benefited from IoT (technologies and innovations) to achieve higher productivity at lower cost!