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Does Natural Selection Mechanism Still Work in Severe Recessions? --]Examination of the Japanese Economy in the 1990s ---

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  • Kiyohiko G. Nishimura

    (Faculty of Economics, The University of Tokyo)

  • Takanobu Nakajima

    (Faculty of Business and Commerce, Keio University)

  • Kozo Kiyota

    (Yokohama National University)

Abstract

This paper investigates whether or not the natural selection mechanism (NSM) of economic Darwinism works in severe recessions. Although standard firm models imply the importance of NSM in an economy by showing firm's rational behavior on entry, surviv-ing, and exit leads to macro-level TFP growth, there is almost no evidence to demonstrate NSM works even in severe recessions and depressions. Based on micro data of the Basic Survey of Japanese Business Structure and Activities (BSJBSA) by Ministry of Economy, Trade and Industry, we construct a comprehensive firm-level panel dataset for Japan from 1994 to 1998, especially designed for the analysis of a firm's entry, survival, and exit and its relationship with TFP. Empirical results show that efficient firms in terms of TFP quit while inefficient ones survived in the banking-crisis period of 1996-1997. Besides, this phenomenon is mainly observed for new entrants and contributes substantially to a fall in macro TFP after 1996. These facts strongly suggest malfunctioning of NSM in severe recessions.

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Bibliographic Info

Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-222.

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Length: 35 pages
Date of creation: May 2003
Date of revision:
Handle: RePEc:tky:fseres:2003cf222

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  1. John R. Baldwin & Paul K. Gorecki, 1991. "Firm Entry and Exit in the Canadian Manufacturing Sector, 1970-1982," Canadian Journal of Economics, Canadian Economics Association, vol. 24(2), pages 300-323, May.
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  3. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  4. Takeo Hoshi & Anil Kashyap, 2000. "The Japanese Banking Crisis: Where Did It Come From and How Will It End?," NBER Chapters, in: NBER Macroeconomics Annual 1999, Volume 14, pages 129-212 National Bureau of Economic Research, Inc.
  5. Griliches, Zvi & Regev, Haim, 1995. "Firm productivity in Israeli industry 1979-1988," Journal of Econometrics, Elsevier, vol. 65(1), pages 175-203, January.
  6. Tybout, James R, 1992. "Linking Trade and Productivity: New Research Directions," World Bank Economic Review, World Bank Group, vol. 6(2), pages 189-211, May.
  7. Chin Hee Hahn, 2000. "Entry, Exit, and Aggregate Productivity Growth: Micro Evidence on Korean Manufacturing," OECD Economics Department Working Papers 272, OECD Publishing.
  8. Emi Nakamura & Masao Nakamura (presenter) & Takanobu Nakajima, 2004. "Measuring Firms’ R&D Effects on Technical Progress: Japan in the 199," Econometric Society 2004 Far Eastern Meetings 414, Econometric Society.
  9. Sekine, Toshitaka & Kobayashi, Keiichiro & Saita, Yumi, 2003. "Forbearance Lending: The Case of Japanese Firms," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(2), pages 69-92, August.
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Cited by:
  1. Flora Bellone & Jérémy Mallen-Pisano, 2013. "Is Misallocation Higher in France than in the United States?," GREDEG Working Papers 2013-38, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
  2. Flora Bellone & Patrick Musso & Michel Quéré & Lionel Nesta, 2006. "Productivity and Market Selection of French Manufacturing Firms in the Nineties," Revue de l'OFCE, Presses de Sciences-Po, vol. 97(5), pages 319-349.
  3. Kozo Kiyota & Tetsuji Okazaki, 2005. "Foreign Technology Acquisition Policy and Firm Performance in Japan, 1957-1970: Micro-aspects of Industrial Policy," CIRJE F-Series CIRJE-F-329, CIRJE, Faculty of Economics, University of Tokyo.
  4. Sebastien Lechevalier, 2007. "The diversity of Capitalism and Heterogeneity of Firms - A Case Study of Japan during the Lost Decade," Post-Print hal-00945167, HAL.
  5. Kozo Kiyota & Tetsuji Okazaki, 2004. "Foreign Technology Acquisition Policy and Firm Performance in Japan, 1957-1970: The Japanese Industrial Policy Revisited (Published in "International Journal of Industrial Organization", Sep," CARF F-Series CARF-F-003, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  6. repec:hal:journl:halshs-00140624 is not listed on IDEAS
  7. Kozo Kiyota & Tetsuji Okazaki, 2004. "Foreign Technology Acquisition Policy and Firm Performance in Japan, 1957-1970: The Japanese Industrial Policy Revisited," CIRJE F-Series CIRJE-F-274, CIRJE, Faculty of Economics, University of Tokyo.

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