Is the Japanese Capital Accumulation Balanced?

Abstract

If there is no way to improve social welfare by diverting investment from one sector to another, then capital accumulation is sectorally balanced. We derive a necessary condition of the sectorallybalanced growth. which can be called no arbitrage condition in shadow prices (NACISP). Assuming perfect competition and constant returns. the test of NACISP is applied to the Japanese data. The result suggests sectorallyunbalanced growth in the Japanese economy between 1960 and 1985. Strong evidence of sectoralunbalancedness is found in agriculture-forestry-fishery, Mining, construction, manufacturing, and real estate industries.