Does the natural selection mechanism still work in severe recessions?: Examination of the Japanese economy in the 1990s

Kiyohiko G. Nishimura; Takanobu Nakajima; Kozo Kiyota

doi:10.1016/j.jebo.2004.03.008

Does the natural selection mechanism still work in severe recessions? Examination of the Japanese economy in the 1990s

Kiyohiko G. Nishimura, Takanobu Nakajima, Kozo Kiyota

Faculty of Business and Commerce

Research output: Contribution to journal › Article › peer-review

76 Citations (Scopus)

Abstract

This paper investigates whether the natural selection mechanism (NSM) of economic Darwinism works in severe recessions. Based on micro data, we constructed a comprehensive firm-level panel dataset for Japan from 1994 to 1998 to analyze a firm's entry, survival, and exit and its relationship with TFP. Empirical results show that efficient firms in terms of TFP exited while inefficient ones survived in the banking-crisis period of 1996-1997. Further, this phenomenon is observed mainly for new entrants and contributes substantially to a fall in macro TFP after 1996. These facts strongly suggest a malfunctioning of NSM in severe recessions.

Original language	English
Pages (from-to)	53-78
Number of pages	26
Journal	Journal of Economic Behavior and Organization
Volume	58
Issue number	1
DOIs	https://doi.org/10.1016/j.jebo.2004.03.008
Publication status	Published - 2005 Sep 1

Keywords

Enterprise census
Entry and exit
TFP

ASJC Scopus subject areas

Economics and Econometrics
Organizational Behavior and Human Resource Management

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10.1016/j.jebo.2004.03.008

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