Total and Productivity of Information and Communication Industries--An International Comparison

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In the early 1980s, the Japanese government adopted policies of liberalization that opened the telecommunication market to competition and moved toward the privatization of Nippon Telegraph and Telephone (NTT), Japan's dominant domestic telecommunication service provider. The purpose of this paper is to assess the effects of these liberalization measures on the productive performance of NTT. To assess the productive consequences of liberalization, we first provide Total and Partial Factor Productivity measures for NTT. The Total Factor Productivity (TFP) measures are then decomposed through TFP regression and both total and variable cost functionbased analytical decomposition methods to separate out the effects of liberalization from other factors such as scale, technology, and capacity utilization. An emphasis will be placed on identifying the effect of competition and privatization on the Total Factor Productivity (TFP) growth. It would be desirable to identify statistically the sepa … More rate effects of privatization and competition on NTT's productivity ; however this is not currently possible. While there are sufficient data to permit an analysis of the shift in Japanese telecommunication policy towards competitive entry and privatization of NTT, the collinearity of the events and the complementary interactive nature of competition and privatization preclude our being able at this time to measure the consequence of each event individually.During the 1958-87 period, NTT's TFP level increased at an average annual rate of 3.2%. However, TFP improved at a significantly faster rate following the 1982 decision to adopt policies of liberalization. The average annual NTT TFP growth rate was 5.1% for the 1982-87 period (i. e., post liberalization) as compared to 2.8% per year for the 1958-82 period, 1.9% per year for 1970-82 period, and 0.26% per year for the 1977-82 period. The decomposition of TFP growth into sources indicates that competition and privatization were a major source of productive improvement for NTT. It is planned to perform a comparison of the total factor productivity of NTT with that of telecommunications providers in U. S., U. K, Canada, Germany, and France. Less