Ec 4325: The Economic Development of Japan Spring 2005 (TR 10:30-11:50 AM) Course Outline and Assigned Readings

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1 Ec 4325: The Economic Development of Japan Spring 2005 (TR 10:30-11:50 AM) Professor David Weinstein Tel: Office: IAB 916 Office Hours: Tuesday 2-4 and by appointment TA: Claudia Canals-Perez Course Outline and Assigned Readings This course covers Japan s economic organization, structure and performance from the midnineteenth century to the present, focusing on the postwar period. Special emphasis is placed on the character of Japanese economic policy making as well as on the behavior of Japanese enterprises, financial institutions, labor force and households. In addition, there is considerable discussion of Japan s recent economic conditions. Class notes: Class notes, handouts, previous exams, and important announcements will be posted on my webpage: Students should check this web page frequently. Class notes should be downloaded and printed the day before class. I will not bring extra copies to class. Class notes do not cover my lectures completely and should not be viewed as a substitute for regular class attendance. Requirements: Midterm Exam: 20% Paper: 40% ( words) Final Exam: 30% Class Participation 10%

2 Explanation of Requirements 1. Students who have not had a two semester principals of economics course should not take this course. Ideally students will have had four semesters of principals. 2. Regular class attendance and regular participation in class discussion. 3. Midterm Exam. A midterm exam consisting of short-answer questions based on the readings and lectures will be given on March An analytical paper about the Japanese economy. Due date: April 28 at 9:10 AM (at the beginning of class). Ideally your paper will ask a question relevant to understanding an aspect of the Japanese economy that we have not covered in class. The paper should then seek to answer the question. Previous successful topics include, what factors explain changes in female labor force participation, were firms with main banks particularly successful during the 1980 s, etc. A good way to find topics is to read some of the chapters in the Other Readings section of the syllabus. You should make an effort to use some primary source material such as the Japan Statistical Yearbook, the Yearbook of Labor Statistics, or National Accounts data. Try to avoid writing a paper that simply describes an industry or a firm. Description may be necessary to answer the question and a literature survey that explains the importance of the question is essential, but it should not be the point of the paper. The paper should be typewritten, double-spaced, about pages (maximum 3500 words), plus tables/exhibits (with your sources indicated), footnotes, and bibliography of sources used. If you desire to do a different kind of paper, consult with me in advance. Unpleasant Issues: The paper must contain references and footnotes; all quotations must be encapsulated in quotation marks and properly referenced. I strongly urge you to read the Columbia College rules regarding plagiarism and proper citation before writing (see Students who plagiarize in this course will fail and may face disciplinary action by the University. Papers arriving after the start of class will receive a penalty of one grade off, with an additional grade off for each day late. These will cumulate until you receive the minimum of either my evaluation of your paper or a C-. 4. Final Exam. 2

3 Readings All Students should purchase Hoshi, Takeo and Kashyap, Anil (2001) Corporate Financing and Governance in Japan, Cambridge: The MIT Press. EC 4325 Course Pack - articles bound in the course pack. The course pack is available at the Village Copier. In addition, all readings are on reserve at Lehman Library. Other Readings Blomstrom, Magnus, Jennifer Corbett, Fumio Hayashi, and Anil Kashyap, eds., Structural Impediments to Growth in Japan (Chicago: University of Chicago Press, 2003) Blomstrom, Magnus, Byron Ganges, and Sumner La Croix, eds., Japan s New Economy: Continuity and Change in the Twenty-First Century (Oxford: Oxford University Press, 2001) Hoshi, Takeo and Hugh Patrick, eds. Crisis and Change in the Japanese Financial System (Boston, Kluwer Academic Publishers, 2000) Posen, Adam (1998) Restoring Japan's Economic Growth, Washington, DC: Institute for International Economics. Aoki, Masahiko and Hugh Patrick, eds. The Japanese Main Bank System: Its Relevance for Developing and Transforming Economies (Oxford: Oxford University Press, 1994) Ito, Takatoshi (1991) The Japanese Economy, Cambridge: MIT Press. Yamamura, Kozo and Yasukichi Yasuba, editors, The Domestic Transformation, Volume 1 of The Political Economy of Japan under the general editorship of Yasusuke Murakami and Hugh T. Patrick (Stanford, CA: Stanford University Press, 1987). Nakamura, Takafusa, The Postwar Japanese Economy -- Its Development and Structure (Tokyo: University of Tokyo Press, 1981). Patrick, Hugh and Henry Rosovsky, editors, Asia's New Giant -- How the Japanese Economy Works (Washington, DC: Brookings Institution, 1976). Japanese Economic Studies is a useful quarterly journal of translations of contemporary Japanese scholarship on economy and management, including occasional industry studies. A useful newspaper is The Nikkei Weekly, the English-language version of Japan's excellent economics daily newspaper. The Economist Intelligence Unit publishes a Country Report on Japan (Quarterly) and a Country Profile for Japan (Annual) that are useful up-to-date references. 3

4 The Journal of the Japanese and International Economies is an excellent, more analytically advanced source of original articles, some of which have been used in NBER conferences. A great website for finding statistical information or links to it are 4

5 January 18: (Class 1) Introduction and Overview January 20: (Class 2) Japanese Economic History to 1850 Oishi, Shinzaburo. (1991) The Bakuhan System in Nakane, Chie and Shinzaburo Oishi eds., Totman, Conrad trans., Tokugawa Japan: The Social and Economic Antecedents of Modern Japan. Tokyo: The University of Tokyo Press. pp January 25: (Class 3) The Opening of Japan Rosovsky, Henry. Japan s Transition to Modern Economic Growth. in Industrialization in Two Systems: Essays in Honor of Alexander Gerschenkron. Ed. Henry Rosovsky. New York: Wiley January 27: (Class 4) Prewar Industrial Policy Francks, Penelope, Japanese Economic Development: Theory and Practice (London: Routledge, 1992), pp February 1: 7PM: (Class 5) Prewar Banking and Finance Hoshi and Kashyap, Chapter 2 February 3: (Class 6) The Rise of Concentration Francks, Penelope, Japanese Economic Development: Theory and Practice (London: Routledge, 1992), pp February 8: (Class 7) Zaibatsu Francks, Penelope, Japanese Economic Development: Theory and Practice (London: Routledge, 1992), pp February 10: (Class 8) Prewar Labor Markets Hoshi and Kashyap, Chapter 3 February 15: (Class 9) The Wartime Japanese Economy Hoshi and Kashyap, Chapter 4 5

6 February 17: (Class 10) Japanese Economic Growth Baumol, William, Sue Ann Batey Blackman, and Edward N. Wolff, International Convergence: The Comparative US Productivity Lag, in Productivity and American Leadership: The Long View, Cambridge: MIT Press, pp February 22: (Class 11) Japanese Labor Practices I: Theory Hashimoto, Masanori and John Raisian. Employment, Tenure and Earnings Profiles in Japan and the United States. American Economic Review 75 (1985): February 24: (Class 12) Japanese Labor Practices II: Empirics Ono, Hiroshi and Marcus E. Rebick, Constraints on the Level and Efficient Use of Labor in Japan ( March 1: (Class 13) Recent Development in Japanese Labor Markets Kato, Takao The End of Lifetime Employment in Japan? Evidence from National Surveys and Field Research, Center for Japanese Economy and Business Working Paper # 185 March 3: (Class 14) Zaibatsu Dissolution and the Formation of the Main Bank System Hoshi and Kashyap, Chapter 5 March 8: (Class 15) The Economics of the Main Bank System Hoshi and Kashyap, Chapter 7 ******** March 10: (Class 16) Midterm ******* March 22: (Class 17) Financial Market Repression Doi, Takero Takeo Hoshi (2004) Paying for the FILP NBER Working Paper 9385 Doi, Takero (2004) Government Financial Institutions: What and How to Reform, Columbia University, (Doi_Final.pdf) 6

7 March 24: (Class 18) Vertical Groups and Buyer-Supplier Relationships Weinstein, David (1997) Foreign Direct Investment and Keiretsu: Rethinking US and Japanese Policy, in Feenstra, Robert ed. The Effects of US Trade Protection and Promotion Policies, Chicago: University of Chicago Press. March 29: (Class 19) Formal Industrial Policy Beason, Richard and David Weinstein, Growth, Economies of Scale, and Targeting in Japan ( ), Review of Economics and Statistics, March 31: (Class 20) Informal Industrial Policy Yamamura, Kozo and Jan Vandenberg, "Japan's Rapid Growth Policy on Trial: The Television Case" in Saxonhouse, Gary and Kozo Yamamura eds. Law and Trade Issues of the Japanese Economy University of Washington Press, Seattle. pp April 5: (Class 21) The Bubble Economy Hoshi and Kashyap Chapter 8. April 7: (Class 22) The Financial Crisis Hoshi, Takeo and Anil Kashyap (2003) Japan s Economic and Financial Crisis: An Overview, April 12: (Class 23) Financial Policy Hoshi, Takeo and Anil Kashyap (2004) Solutions to Japan s Banking Problems: What might work and what definitely will Fail University of Chicago, mimeo April 14: (Class 24) Macroeconomic Policy Posen, Adam (2004) It Takes More than a Bubble to Become Japan April 19: (Class 25) Fiscal Policy Broda, Christian and David Weinstein (2004) Happy News from the Dismal Science: Rethinking Japanese Fiscal Policy and Sustainability April 21: (Class 26) Monetary Policy I Harrigan, James and Kenneth Kuttner (2004) Lost decade in translation: Has the US learned from Japan s post-bubble mistakes? 7

8 April 26: (Class 27) The Big Bang Ito, Takatoshi and Frederic Mishkin, Monetary Policy in Japan: Problems and Solutions April 28: (Class 28) The Big Bang and Beyond 8