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February 29, 2012

[SSJ: 7230] Re: implications of declining population for J economy

From: Arthur Alexander
Date: 2012/02/29


A short reply to Prof Caves:

If Japanese companies had less capital there would be a tendency to substitute labor to achieve the same output. That would accomplish Caves objective of increasing the labor share of national income. For comparison, the American labor share of national income has averaged around 78% versus 63% for Japan over the past 20 years. That is a huge amount of income not received by Japanese workers. The reason is that Japanese firms uses about twice as much capital per unit of GDP. The critical point about lower rates of return is that Japanese companies are literally pissing away household savings with little to show for it.

Arthur Alexander

Approved by ssjmod at 11:27 AM