Industrial Policy Cuts Two Ways: Evidence from Cotton Spinning Firms in Japan, 1956-1964
AbstractA number of studies have revealed that the effect of industrial policy on productivity growth is negative. 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. It has been determined 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 of large firms during this period, industrial policy resulted in negative industry productivity growth.
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Bibliographic InfoPaper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-563.
Length: 35 pages
Date of creation: May 2008
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Other versions of this item:
- Kozo Kiyota & Tetsuji Okazaki, 2010. "Industrial Policy Cuts Two Ways: Evidence from Cotton-Spinning Firms in Japan, 1956–1964," Journal of Law and Economics, University of Chicago Press, vol. 53(3), pages 587 - 609.
- 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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- NEP-HIS-2008-05-17 (Business, Economic & Financial History)
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