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"
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.
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- Joe Peek & Eric S. Rosengren, 2005.
"Unnatural Selection: Perverse Incentives and the Misallocation of Credit in Japan,"
American Economic Review,
American Economic Association, vol. 95(4), pages 1144-1166, September.
- Joe Peek & Eric S. Rosengren, 2003. "Unnatural Selection: Perverse Incentives and the Misallocation of Credit in Japan," NBER Working Papers 9643, National Bureau of Economic Research, Inc.
- Nishimura, Kiyohiko G. & Nakajima, Takanobu & Kiyota, Kozo, 2005. "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. 58(1), pages 53-78, September.
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