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Does Competition Improve Industrial Productivity? An analysis of Japanese industries on the basis of the industry-level panel data

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  • AMBASHI Masahito

Abstract

This study mainly investigates the causal relation between the degree of competition, which is measured by the Lerner index, and the total factor productivity (TFP) growth rate on the basis of the Japanese industry-level panel data (Japan Industrial Productivity (JIP) Database) from 1980 to 2008. The central finding indicates that, although a positive effect of competition on the TFP growth rate is clearly observable in the manufacturing industries throughout the sample period, such effect in the non-manufacturing industries may be slightly negative in the latter half of the sample period (1995-2008). This finding of a negative competition effect may lend support to the claim that the Schumpeterian hypothesis can be applied in the case of the non-manufacturing industries. Furthermore, a weak inverted-U shape relation between the competition measure and TFP growth proposed by Aghion et al. (2005) can be seen limitedly almost exclusively in all industries.

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Bibliographic Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 13098.

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Length: 48 pages
Date of creation: Nov 2013
Date of revision:
Handle: RePEc:eti:dpaper:13098

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  1. Yosuke Okada, 2005. "Competition and Productivity in Japanese Manufacturing Industries," NBER Working Papers 11540, National Bureau of Economic Research, Inc.
  2. Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and innovation: an inverted U relationship," IFS Working Papers W02/04, Institute for Fiscal Studies.
  3. George Symeonidis, 1996. "Innovation, Firm Size and Market Structure: Schumpeterian Hypotheses and Some New Themes," OECD Economics Department Working Papers 161, OECD Publishing.
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  6. Martin Neil Baily & Robert M. Solow, 2001. "International Productivity Comparisons Built from the Firm Level," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 151-172, Summer.
  7. Schmidt, Klaus M., 1997. "Managerial Incentives and Product Market Competition," Munich Reprints in Economics 19772, University of Munich, Department of Economics.
  8. David Flath, 2009. "Industrial Concentration, Price-Cost Margins, and Innovation," ISER Discussion Paper 0739, Institute of Social and Economic Research, Osaka University.
  9. David Scharfstein, 1988. "Product-Market Competition and Managerial Slack," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 147-155, Spring.
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  14. Blundell, Richard & Griffith, Rachel & van Reenen, John, 1999. "Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms," Review of Economic Studies, Wiley Blackwell, vol. 66(3), pages 529-54, July.
  15. Okada, Yosuke, 2005. "Competition and productivity in Japanese manufacturing industries," Journal of the Japanese and International Economies, Elsevier, vol. 19(4), pages 586-616, December.
  16. Oliver D. Hart, 1983. "The Market Mechanism as an Incentive Scheme," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 366-382, Autumn.
  17. repec:fth:inseep:9833 is not listed on IDEAS
  18. Stephen Nickell, 1993. "Competition and Corporate Performance," CEP Discussion Papers dp0182, Centre for Economic Performance, LSE.
  19. Fumio Hayashi & Edward C. Prescott, 2002. "Data Appendix to The 1990s in Japan: A Lost Decade," Technical Appendices hayashi02, Review of Economic Dynamics.
  20. ITO Keiko & LECHEVALIER Se'bastien, 2010. "Why Do Some Firms Persistently Outperform Others? An investigation of the interactions between innovation and export strategies," Discussion papers 10037, Research Institute of Economy, Trade and Industry (RIETI).
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