Does Competition Improve Industrial Productivity? An analysis of Japanese industries on the basis of the industry-level panel data
This study mainly investigates the causal relation between the degree of competition, which is measured by the Lerner index, and the total factor productivity (TFP) growth rate on the basis of the Japanese industry-level panel data (Japan Industrial Productivity (JIP) Database) from 1980 to 2008. The central finding indicates that, although a positive effect of competition on the TFP growth rate is clearly observable in the manufacturing industries throughout the sample period, such effect in the non-manufacturing industries may be slightly negative in the latter half of the sample period (1995-2008). This finding of a negative competition effect may lend support to the claim that the Schumpeterian hypothesis can be applied in the case of the non-manufacturing industries. Furthermore, a weak inverted-U shape relation between the competition measure and TFP growth proposed by Aghion et al. (2005) can be seen limitedly almost exclusively in all industries.
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