BoJ paper sketches ‘vicious circle’ behind productivity traps
Lack of innovation and reform can create “negatively reinforcing” loop, authors warn
Research published by the Bank of Japan (BoJ) outlines a mechanism whereby firms’ unwillingness to innovate and poor reform effort by the government create a downward spiral, harming productivity.
Structural Reforms, Innovation and Economic Growth, published today (April 13), builds on a model whereby firms have less incentive to innovate the further they fall behind the technology frontier – instead, they make gains by catching up. Government reforms are complementary – as the economy grows
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