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A comment on Nishimura, Nakajima, and Kiyota's "Does the natural selection mechanism still work in severe recessions? Examination of the Japanese economy in the 1990s"

Author

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  • Okada, Tae
  • Horioka, Charles Yuji

Abstract

Nishimura et al. [Nishimura, K.G., Nakajima, T., Kiyota, K., 2005. Does the natural selection mechanism still work in severe recessions? Examination of the Japanese economy in the 1990s. Journal of Economic Behavior and Organization 58, 53-78] analyze the entry/exit behavior of Japanese firms during the 1990s and find that relatively efficient firms exited while relatively inefficient firms survived during the banking-crisis period of 1996-1997. They conclude that the natural selection mechanism (NSM) apparently malfunctions during severe recessions, but we offer a more plausible interpretation: NSM continued to function effectively even during this period, but aberrant banking practices caused a shift in the type of natural selection from directional to disruptive selection, with the most efficient as well as the least efficient firms being favored and firms of intermediate efficiency being selected against.

Suggested Citation

  • Okada, Tae & Horioka, Charles Yuji, 2008. "A comment on Nishimura, Nakajima, and Kiyota's "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. 67(2), pages 517-520, August.
    • Handle: RePEc:eee:jeborg:v:67:y:2008:i:2:p:517-520
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    Cited by:

    1. Uchida, Hirofumi, 2020. "Natural selection: A review of studies on firms’ exit and efficiency," MPRA Paper 103938, University Library of Munich, Germany.
    2. Dan Andrews & Filippos Petroulakis, 2017. "Breaking the Shackles: Zombie Firms, Weak Banks and Depressed Restructuring in Europe," OECD Economics Department Working Papers 1433, OECD Publishing.
    3. Masami Imai, 2009. "Political Influence and Declarations of Bank Insolvency in Japan," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(1), pages 131-158, February.
    4. Olivier Mesly & David W. Shanafelt & Nicolas Huck, 2021. "Dysfunctional Markets: A Spray of Prey Perspective," Journal of Economic Issues, Taylor & Francis Journals, vol. 55(3), pages 797-819, July.

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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