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Resource Reallocation and Zombie Lending in Japan in the 1990s

Author

Listed:
  • Hyeog Ug Kwon

    (Nihon University)

  • Futoshi Narita

    (International Monetary Fund)

  • Machiko Narita

    (International Monetary Fund)

Abstract

We investigate how resources were reallocated in Japan during the 1990s, a decade of economic recession, by measuring aggregate productivity growth (APG) using plant-level data of manufacturers from 1981 to 2000. We find that the contribution to APG of resource reallocation deteriorated in the 1990s and became negative during the late 1990s, when a financial crisis occurred. Matched firm-plant data suggest that misdirected lending by banks to failing firms (zombie lending) allowed them to avoid reducing production inputs, especially labor. Our counter-factual analysis using a general equilibrium model with heterogeneous plants indicates that without zombie lending, annual APG would have been higher by one percentage point during the 1990s. (Copyright: Elsevier)

Suggested Citation

  • Hyeog Ug Kwon & Futoshi Narita & Machiko Narita, 2015. "Resource Reallocation and Zombie Lending in Japan in the 1990s," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 709-732, October.
  • Handle: RePEc:red:issued:12-232
    DOI: 10.1016/j.red.2015.07.001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Ichiro Muto & Nao Sudo & Shunichi Yoneyama, "undated". "Productivity Slowdown in Japan's Lost Decades: How Much of It Can Be Attributed to Damaged Balance Sheets?," Bank of Japan Working Paper Series 16-E-3, Bank of Japan.
    2. repec:mof:journl:ppr13_03_03 is not listed on IDEAS
    3. Selahattin Imrohoroglu, 2017. "Replacing Income Taxation with Consumption Taxation in Japan," CIGS Working Paper Series 17-008E, The Canon Institute for Global Studies.
    4. Sangeeta Pratap & Carlos Urrutia & Felipe Meza, 2017. "Credit, Misallocation and Productivity Growth: A Disaggregated Analysis," 2017 Meeting Papers 538, Society for Economic Dynamics.
    5. KASAHARA Hiroyuki & NISHIDA Mitsukuni & SUZUKI Michio, 2017. "Decomposition of Aggregate Productivity Growth with Unobserved Heterogeneity," Discussion papers 17083, Research Institute of Economy, Trade and Industry (RIETI).
    6. Mauro Caselli & Stefano Schiavo & Lionel Nesta, 2017. "Markups and markdowns," Documents de Travail de l'OFCE 2017-11, Observatoire Francais des Conjonctures Economiques (OFCE).
    7. 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.
    8. repec:eee:chieco:v:44:y:2017:i:c:p:327-342 is not listed on IDEAS
    9. repec:eee:jjieco:v:48:y:2018:i:c:p:15-28 is not listed on IDEAS
    10. GOTO Yasuo & Scott WILBUR, 2017. "Efficiency among Japanese SMEs: In the context of the zombie firm hypothesis and firm size," Discussion papers 17123, Research Institute of Economy, Trade and Industry (RIETI).
    11. Selahattin Imrohoroglu & Gary Hansen, 2017. "Replacing Income Taxation with Consumption Taxation in Japan," 2017 Meeting Papers 1114, Society for Economic Dynamics.
    12. Jie Wu & Qingyuan Zhu & Wade D Cook & Joe Zhu, 2016. "Best cooperative partner selection and input resource reallocation using DEA," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(9), pages 1221-1237, September.

    More about this item

    Keywords

    Japan; Plant-level data; Productivity; Proxy estimation; Resource reallocation; Zombie lending;

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • 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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