Sectoral shifts and structural change in the Japanese economy: Evidence and interpretation

This paper documents long-term trends in the sectoral composition of employment and output in the Japanese economy over the last four decades. The share of the manufacturing sector in total employment has declined steadily while the share of service sector employment has trended upward. In real terms, however, the share of the manufacturing sector in the total output has remained stable over the last two decades, reflecting relatively rapid productivity growth in this sector. Various measures of productivity and changes in the inter-industry relative wage structure are examined in order to interpret these and other long-term trends. This paper also computes measures of inter-sectoral labor reallocation at different levels of disaggregation and finds no evidence of a recent increase in the pace of structural change in the Japanese economy.