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Productivity, returns to scale and product differentiation in the retail trade industry: an empirical analysis using Japanese firm-level data

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  • Atsuyuki Kato

Abstract

This paper examines productivity and returns to scale under the assumption of monopolistic competition using Japanese firm-level data. Although differentiating products (services) is considered important in firms’ strategies and productivity growth, it has not been sufficiently investigated in previous studies. In this paper, we study this issue in two retail trade industries, department stores and supermarkets, applying the model of Melitz ( 2000 ). Our results indicate that the standard production function is not relevant to estimate productivity in imperfectly competitive markets. It also suggests that the market structure should be carefully considered in productivity analysis. In addition, product differentiation has a positive effect on firms’ revenue for the supermarkets. Furthermore, the retail trade industries possibly follow increasing returns to scale. Thus, policy measures that promote economies of scale and product differentiation should contribute to further growth in these industries. In addition, the results indicate that the regulatory reform of the retail trade industry in 2000 increased the gap between winners and losers in terms of productivity. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Atsuyuki Kato, 2012. "Productivity, returns to scale and product differentiation in the retail trade industry: an empirical analysis using Japanese firm-level data," Journal of Productivity Analysis, Springer, vol. 38(3), pages 345-353, December.
    • Handle: RePEc:kap:jproda:v:38:y:2012:i:3:p:345-353
    DOI: 10.1007/s11123-011-0251-1
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    Cited by:

    1. MORIKAWA Masayuki, 2019. "Price Competition vs. Quality Competition: Evidence from a Survey," Discussion papers 19075, Research Institute of Economy, Trade and Industry (RIETI).
    2. Morikawa, Masayuki, 2021. "Price competition vs. quality competition: Evidence from firm surveys," Journal of Economics and Business, Elsevier, vol. 116(C).

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    More about this item

    Keywords

    Increasing returns to scale; Monopolistic competition; Product differentiation; Productivity; Regulatory reform; C81; D24; L11;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • 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

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