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On the Establishment Dynamics in the United States and Japan

  • Toshihiko Mukoyama

    (University of Virginia and CIREQ (E-mail: tm5hs@

This paper compares the establishment-level dynamics of the United States and Japan. I find that there are substantial differences in entry and exit behavior, the average size of establishments, and the amount of job reallocation. First, entry and exit rates are much lower in Japan. Second, the average size of establishments is much smaller in Japan, while the average size of opening/closing establishments are similar in the U.S. and Japan. Third, the amount of job creation and job destruction is much smaller in Japan, especially for continuing establishments. I first examine whether these differences are accounted for by sectoral compositions, and find that the differences in sectoral composition do not explain these facts. Then I construct a general equilibrium industry dynamics model and explore the roles of various frictions in generating these differences. The model experiments suggest that in Japan, there may be important impediments for establishment entry/exit and there may be factors impeding productive establishments from growing larger.

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Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 09-E-16.

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Date of creation: Jul 2009
Date of revision:
Handle: RePEc:ime:imedps:09-e-16
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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. Yoonsoo Lee & Toshihiko Mukoyama, 2008. "Entry, exit and plant-level dynamics over the business cycle," Working Paper 0718, Federal Reserve Bank of Cleveland.
  3. Xu Yi & Nezih Guner & Gustavo Ventura, 2005. "Macroeconomic Implications of Size Dependent Policies," 2005 Meeting Papers 530, Society for Economic Dynamics.
  4. Roberto M Samaniego, 2003. "Employment Protection, Exit and Macroeconomic Dynamics," Computing in Economics and Finance 2003 28, Society for Computational Economics.
  5. Kyoji Fukao & Hyeog Ug Kwon, 2005. "Why Did Japan's TFP Growth Slow Down in the Lost Decade? An Empirical Analysis Based on Firm-Level Data of Manufacturing Firms," Discussion papers 05004, Research Institute of Economy, Trade and Industry (RIETI).
  6. Lucia Foster & John Haltiwanger & C.J. Krizan, 1998. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Working Papers 6803, National Bureau of Economic Research, Inc.
  7. Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
  8. Edward C. Prescott, 2004. "Why do Americans Work so Much More than Europeans?," NBER Working Papers 10316, National Bureau of Economic Research, Inc.
  9. Esteban Rossi-Hansberg & Mark L. J. Wright, 2006. "Establishment size dynamics in the aggregate economy," Staff Report 382, Federal Reserve Bank of Minneapolis.
  10. Genda, Yuji, 1998. "Job Creation and Destruction in Japan, 1991-1995," Journal of the Japanese and International Economies, Elsevier, vol. 12(1), pages 1-23, March.
  11. Hernan J. Moscoso Boedo & Toshihiko Mukoyama, 2011. "Evaluating the Effects of Entry Regulations and Firing Costs on International Income Differences," Virginia Economics Online Papers 379, University of Virginia, Department of Economics.
  12. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
  13. Eric Bartelsman & John Haltiwanger & Stefano Scarpetta, 2009. "Measuring and Analyzing Cross-country Differences in Firm Dynamics," NBER Chapters, in: Producer Dynamics: New Evidence from Micro Data, pages 15-76 National Bureau of Economic Research, Inc.
  14. Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2008. "Zombie Lending and Depressed Restructuring in Japan," American Economic Review, American Economic Association, vol. 98(5), pages 1943-77, December.
  15. Sanghoon Ahn & Kyoji Fukao & Hyeog Ug Kwon, 2005. "The Internationalization and Performance of Korean and Japanese Firms: An Empirical Analysis Based on Micro-data," Discussion papers 05008, Research Institute of Economy, Trade and Industry (RIETI).
  16. Joao F. Gomes, 2001. "Financing Investment," American Economic Review, American Economic Association, vol. 91(5), pages 1263-1285, December.
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