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Revisiting Productivity Differences and Firm Turnover: Evidence from product-based TFP measures in the Japanese manufacturing industries

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  • KAWAKAMI Atsushi
  • MIYAGAWA Tsutomu
  • TAKIZAWA Miho

Abstract

Following Foster, Haltiwanger, and Syverson (2008), we construct physical output based TFP (TFPQ) measures using data from the Census of Manufactures. We find that productivity differences among business establishments using TFPQ are larger than those using the traditional revenue-based TFP measures (TFPR). The negative correlation between physical output and output prices implies that establishments are facing a downward demand curve and the traditional measures of TFP are affected by idiosyncratic demand shocks. Probit estimations regarding exit behavior show that the combined effects of physical productivity improvement and higher prices through the increase in demand result in a lower probability of exit. Breaking down aggregate productivity growth using TFPQ, we find that the contribution of the net entry effects the largest factor to productivity improvement, in contrast to previous Japanese studies. Our results provide a more positive foundation for "creative destruction" policies than previous studies suggest.

Suggested Citation

  • KAWAKAMI Atsushi & MIYAGAWA Tsutomu & TAKIZAWA Miho, 2011. "Revisiting Productivity Differences and Firm Turnover: Evidence from product-based TFP measures in the Japanese manufacturing industries," Discussion papers 11064, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:11064
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    References listed on IDEAS

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    1. 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.
    2. Kozo Kiyota & Miho Takizawa, 2006. "The Shadow of Death: Pre-exit Performance of Firms in Japan," Discussion papers 06033, Research Institute of Economy, Trade and Industry (RIETI).
    3. Lucia Foster & John Haltiwanger & Chad Syverson, 2008. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," American Economic Review, American Economic Association, vol. 98(1), pages 394-425, March.
    4. Kyoji Fukao & Hyeog Ug Kwon, 2006. "Why Did Japan'S Tfp Growth Slow Down In The Lost Decade? An Empirical Analysis Based On Firm‐Level Data Of Manufacturing Firms," The Japanese Economic Review, Japanese Economic Association, vol. 57(2), pages 195-228, June.
    5. Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Chapters, in: New Developments in Productivity Analysis, pages 303-372, National Bureau of Economic Research, Inc.
    6. KAWAKAMI Atsushi & MIYAGAWA Tsutomu, 2010. "Product Switching and Firm Performance in Japan," Discussion papers 10043, Research Institute of Economy, Trade and Industry (RIETI).
    7. TAKII Katsuya, 2011. "Persistent Productivity Differences Between Firms," Discussion papers 11048, Research Institute of Economy, Trade and Industry (RIETI).
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    Cited by:

    1. MORIKAWA Masayuki, 2017. "Dispersion and Volatility of TFPQ in Service Industries," Discussion papers 17088, Research Institute of Economy, Trade and Industry (RIETI).
    2. MORIKAWA Masayuki, 2019. "Price Competition vs. Quality Competition: Evidence from a Survey," Discussion papers 19075, Research Institute of Economy, Trade and Industry (RIETI).
    3. Morikawa, Masayuki, 2021. "Price competition vs. quality competition: Evidence from firm surveys," Journal of Economics and Business, Elsevier, vol. 116(C).
    4. Morikawa, Masayuki, 2017. "Impact of Foreign Tourists on Productivity in the Accommodation Industry : A panel data analysis," SSPJ Discussion Paper Series DP17-012, Service Sector Productivity in Japan: Determinants and Policies, Institute of Economic Research, Hitotsubashi University.
    5. MORIKAWA Masayuki, 2017. "Dispersion and Volatility of TFPQ in Service Industries," Discussion papers 17088, Research Institute of Economy, Trade and Industry (RIETI).

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