ERI Discussion Paper Series No.74
Measuring the Effects of Regulatory Reform in Japan: A Review

March 1997
Seiji Shimpo
(Economic Planning Agency)
Fumihira Nishizaki
(Economic Planning Agency)


The current state of research on the effects of regulatory reform in Japan is briefly reviewed. It tells us that there are a number of such studies on the economy-wide effects of overall deregulation with fairly rough assumptions. On the other hand, there are a very limited number of sector-specific studies with a rigorous application of microeconomic theory and detailed information on technological and institutional frameworks.

From the former types of studies, the potential benefits of deregulation in terms of GDP seem to be significant. The massive displacement of employment found in some studiesis exaggerated. Besides the feasibility of proposed reforms, however, there is still something fragile in this inference. Namely, the exact timing of the realization of certain productivity improvement cannot be predicted with certainty. In this respect, accumulation of knowledge on how reform works in specific industries is important.

Studies on specific industries, though limited in number, also suggest that the potential benefits are sizeable. At the same time, some studies show that the recent initiatives are not sufficient in producing significant impact. Generally speaking, a particular reform has a meaningful welfare implication when it induces firms to increase (technical) efficiency. The forthcoming initiatives should be designed in line with this principle.

APPENDIX: Markup Estimates for Non-manufacturing Sectors in Japan

The markup ratios for non-manufacturing sectors in Japan are estimated by using Roeger's method on the assumption of constant returns to scale. The results are compared with existing estimates by the traditional method in which the statistical properties are not satisfactory but the economy of scale is explicitly treated. Both results indicate higher markups for non-manufacturing sectors than for manufacturing sectors on average and positive but weak association with sectoral wage premiums.

Structure of the whole text

  1. Abstract別ウィンドウで開きます。(PDF-Format 378 KB)
  2. page1
    I. Trends in Regulatory Reform
  3. page2
    II. Choice of Assumptions in Measuring Effects
  4. page3
    III. Economy-wide Effects of Deregulation
  5. page5
    IV. Sector-specific Approach I: Welfare Gains
  6. page7
    V. Sector-specific Approach II: Productivity, Employment and Investment
  7. page8
    VI. Concluding Remarks
  8. page18
    APPENDIX: Markup Estimates for Non-manufacturing Sectors in Japan
    1. page18
      I. Estimates by Roeger's Method
    2. page18
      II. Estimates under Increasing or Decreasing Returns to Scale
    3. page20
      III. Cocluding Remarks
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