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

Research output: Contribution to journalArticle

72 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 languageEnglish
Pages (from-to)53-78
Number of pages26
JournalJournal of Economic Behavior and Organization
Volume58
Issue number1
DOIs
Publication statusPublished - 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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