THE SUN ALSO RISES: PRODUCTIVITY CONVERGENCE BETWEENJAPAN AND THE USA

The growth process for a technological leader is different from that of a follower.While followers can grow through imitation and capital deepening, a leader must undertakeoriginal research. This suggests that as the gap between the leader and the follower narrows, thefollower must undertake more formal R&D and possibly face a slower overall growth rate. Thispaper constructs measures of relative total factor productivity for eleven Japanese manufacturingindustries and uses dynamic panel data methods to test whether a smaller productivity gap leadsto slower growth, and whether R&D takes over as the engine of growth as Japan approaches thetechnological frontier. The results suggest that Japanese and US productivity have been growingat similar rates since the mid-1970s, and that some of the Japanese growth slowdown isattributable to the exhaustion of imitation possibilities....