Industrial Policy Cuts Two Ways: Evidence from Cotton-Spinning Firms in Japan, 1956–1964
AbstractA number of studies have revealed a negative effect of industrial policy on productivity growth. Is this because industrial policy fails to control the activities of firms or because it can effectively control them? This paper attempts to answer these questions, using firm-level data from the cotton-spinning industry in Japan for the period 1956–64. We determine that industrial policy cut two ways during this period. Industrial policy effectively controlled the output of cotton-spinning firms, which contributed to the establishment of a stable market structure during the period. On the flip side, such policy constrained the reallocation of resources from less productive large firms to more productive small firms. Combined with the negative productivity growth in large firms during this period, industrial policy resulted in negative productivity growth in the industry.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal The Journal of Law and Economics.
Volume (Year): 53 (2010)
Issue (Month): 3 ()
Pages: 587 - 609
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Web page: http://www.journals.uchicago.edu/JLE/
Other versions of this item:
- Kozo Kiyota & Tetsuji Okazaki, 2008. "Industrial Policy Cuts Two Ways: Evidence from Cotton Spinning Firms in Japan, 1956-1964," CIRJE F-Series CIRJE-F-563, CIRJE, Faculty of Economics, University of Tokyo.
- Kozo Kiyota & Tetsuji Okazaki, 2009. "Industrial Policy Cuts Two Ways: Evidence from Cotton Spinning Firms in Japan, 1956-1964," Global COE Hi-Stat Discussion Paper Series gd09-101, Institute of Economic Research, Hitotsubashi University.
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