Elsevier

Research Policy

Volume 21, Issue 6, December 1992, Pages 481-505
Research Policy

Trends in the substitution of production factors to technology—empirical analysis of the inducing impact of the energy crisis on Japanese industrial

https://doi.org/10.1016/0048-7333(92)90006-PGet rights and content

Abstract

Japan successfully overcame the energy crises of 1973 and 1979, maintaining productivity in the face of drastically increased energy prices, despite the fragile nature of its energy structure. This was due to technological innovation efforts that led to rapid improvement in Japan's industrial technology as a whole.

This paper tries to prove this hypothesis on the basis of an examination of the trends in the substitution of production factors by technology as represented by R&D investment efforts.

Since the first energy crisis in 1973, there have been a number of attempts to identify the possibility of substitutability of energy by other production factors, but none have been successful in taking technology into account.

This paper tackles this subject on the basis of the measurement of the technological knowledge stock and en empirical analysis using a translog cost function incorporating this stock, and shows that over the last two decades all production factors have been substituted by technology in Japan's manufacturing industry or have been moving towards that direction.

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    I am grateful to Mr. Irawan Santoso for his computer work and also to the referees for their valuable advice.

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