26-th International Workshop on Bayesian Inference and Maximum Entropy Methods in Science and Engineering

The objective of this paper is to examine the performance of post-war Japanese economy using a production function of economic growth model. The basic framework is a variation of aggregate production function used by Solow (1956), Mankiw, Romer, and Weil (1992), etc. We consider the Cobb=Douglas production function with private capital, public capital, human capital and labour as inputs, so production for prefecture i at time t is represented by Qi(t) = Ki(t)iGi(t)iHi(t)i [Ai(t)Li(t)]1−αi−βi−γi (i = 1, 2, . . . ,m), where Qi(t) is output, Ki(t) is the stock of private capital, Gi(t) is the stock of public capital, Hi(t) is the stock of human capital, Li(t) is the size of the labour force and Ai(t) is a productivity index which summarizes the level of technology. The above model can be expressed in a form of linear model under the logarithmic tranformation. A set of Bayesian models is constructed by using smoothness priors for values related to Ai(t) and non-informative priors for the parameters αi, βi and γi. Furthermore, Monte Carlo filter and smoother approach is applied to estimate the parameters. We show the effects of the private capital, the public capital and the human capital on output by analyzing the values of these parameters. The related result was firstly reported by Kyo and Noda (2005). References: [1] K. Kyo, and H. Noda (2005), Statistical analysis of cross-prefecture production function with dynamic structure in Japan, Paper Presented at International Symposium: Intersection, Fusion and Development of Multi-Fields, Chinese Academy of Science and Engineering in Japan. [2] Mankiw, N. G., D. Romer, and D. Weil (1992), A Contribution to the Empirics of Economic Growth, Quarterly Journal of Economics, Vol.107, pp.407-437. [3] Solow, R. M. (1956), A Contribution to the Theory of Economic Growth, Quarterly Journal of Economics, Vol.70, pp.65-94.