Industrial policy without carrots or sticks: Non-coercive administrative guidance in Japan

Active intervention by the Japanese government has often been cited as a leading cause for Japan's high rate of post-war economic development. In particular, extra-legal administrative guidance (gyosei shido ) has been identified as a means by which Japanese, bureaucrats have coordinated business activities to enhance growth.;Firms have been thought to adhere to gyosei shido because of implicit threats, but this is often inconsistent with the actual powers available to Japanese bureaucrats. This dissertation examines the mechanisms of non-coercive administrative guidance, with an application to voluntary export restraints coordinated by MITI for the Japanese automotive industry.;A formal model of a voluntary export restraint with non-coercive information provision by a bureaucracy is derived and shown to be consistent with Japanese economic development and the developmental state.;Non-coercive administrative guidance is found to be effective when the bureaucracy can leverage information to guide firms towards a mutually beneficial outcome. The historical conditions of the wax and wane of MITI's legal authority are found to explain the apparent success of non-coercive administrative guidance in the automotive industry.