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Product Switching and Firm Performance in Japan - Empirical Analysis Based on the Census of Manufacturers

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  • Atsushi Kawakami

    (Associate Professor, Global Exchange Office for Research and Education, Gakushuin University)

  • Tsutomu Miyagawa

    (Professor, Faculty of Economics, Gakushuin University)

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    Abstract

    Following Bernard, Redding and Schott (2010), we have constructed product and firm level data on Japanese manufacturing firms using the Census of Manufacturers. Our empirical analysis based on the constructed data shows that multiple-product firms perform better than single-product firms and their labor productivity growth rates are higher. Empirical studies at the industry level show that an unregulated, competitive environment stimulates product switching. At the firm level, product switching behavior improves firm performance, including employment, while the firms that reduce the number of their products see a decline in labor productivity, due to output reduction exceeding the magnitude of the reduction in employment.

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    File URL: http://www.mof.go.jp/english/pri/publication/pp_review/ppr021/ppr021b.pdf
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    Bibliographic Info

    Article provided by Policy Research Institute, Ministry of Finance Japan in its journal Public Policy Review.

    Volume (Year): 9 (2013)
    Issue (Month): 2 (March)
    Pages: 287-314

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    Handle: RePEc:mof:journl:ppr021b

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    Web page: http://www.mof.go.jp/pri/
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    Related research

    Keywords: Entry; Exit; Multiple-Product Firm; Product Switching; Labor Productivity; TFPCPropensity Score Matching Model;

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    References

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    1. Andrew B. Bernard & Peter K. Schott & Stephen Redding, 2003. "Product Choice and Product Switching," NBER Working Papers 9789, National Bureau of Economic Research, Inc.
    2. Carol Newman & John Rand & Finn Tarp, 2007. "Sector Switching: An Unexplored Dimension of Firm Dynamics in Developing Countries," The Institute for International Integration Studies Discussion Paper Series iiisdp230, IIIS.
    3. Campa, Jose M. & Kedia, Simi, 2000. "Explaining the diversification discount," IESE Research Papers D/424, IESE Business School.
    4. Kyoji Fukao & Hyeog Ug Kwon, 2006. "Why Did Japan'S Tfp Growth Slow Down In The Lost Decade? An Empirical Analysis Based On Firm-Level Data Of Manufacturing Firms," The Japanese Economic Review, Japanese Economic Association, vol. 57(2), pages 195-228.
    5. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
    6. Nishimura, Kiyohiko G. & Nakajima, Takanobu & Kiyota, Kozo, 2005. "Does the natural selection mechanism still work in severe recessions?: Examination of the Japanese economy in the 1990s," Journal of Economic Behavior & Organization, Elsevier, vol. 58(1), pages 53-78, September.
    7. Fariñas, Jose C. & Ruano, Sonia, 2005. "Firm productivity, heterogeneity, sunk costs and market selection," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 505-534, September.
    8. Greenaway, David & Gullstrand, Joakim & Kneller, Richard, 2008. "Surviving globalisation," Journal of International Economics, Elsevier, vol. 74(2), pages 264-277, March.
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