Using plant-level data underlying the Census of Manufactures, total factor productivity (TFP) growth and its determinants are analyzed for the Japanese automobile industry since 1980s. The average annual TFP growth rate from 1981 to 1996 was only about 0.6 percent for the automobile assembly industry and about 1.3 percent for the auto parts manufacturing industry. In the Japanese auto parts manufacturing industry, we found that R&D spillovers from assemblers had a significantly positive effect on the parts suppliers’ TFP growth and that parts suppliers located near an assembly plant achieved higher TFP growth.
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