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Large, extensively diversified pyramidal business groups of listed firms dominate the histories of developed economies and the economies of developing economies. While such groups (called zaibatsu in Japan) are thought to have provided coordination for big push growth successfully in pre-second-world-war Japan after a state-run big push failed, it is still being debated whether such a pyramidal business group driven big push coordination exists in developing countries elsewhere in Asia. We hypothesize that pyramidal business groups can be private-sector mechanisms for coordinating big push growth, provided that first, competition between rival groups induces a sufficiently high level of coordination efficiency, and second, conditions exist for maintaining economic openness and basic infrastructure and legal institutions. Another condition that must be satisfied for a country to sustain economic growth after its big push phase is complete is a timely demise of business groups. Where these criteria are not met, growth stalls and the few pyramidal business groups become too powerful to dislodge. [ABSTRACT FROM AUTHOR]

Based on annual data from Japan for the period 1960 to 2010, we investigate the government expenditure–economic growth relation in Japan by using the autoregressive distributed lag test for threshold cointegration developed by Li and Lee (2010). In particular, we evaluate the validity of Wagner’s view and the Keynesian view in the case of Japan. The empirical results presented herein indicate that of these two classical economics perspectives, only Wagner’s view holds for Japan. The findings also demonstrate that the adjustment process towards its long-run equilibrium is asymmetric. [ABSTRACT FROM PUBLISHER]