IDEAS home Printed from https://ideas.repec.org/p/upd/utmpwp/012.html
   My bibliography  Save this paper

Dynamic Productivity Decomposition with Allocative Efficiency

Author

Listed:
  • Kaoru Hosono

    (Gakushuin University)

  • Miho Takizawa

    (Gakushuin University)

Abstract

We propose a novel approach to decomposing aggregate productivity growth into changes in technical efficiency, allocative efficiency, and variety of goods as well as relative efficiency of entrants and exiters. We measure technical efficiency by the aggregate production possibility frontier and allocative efficiency by the distance from the frontier. Applying our approach to establishment- and firm-level datasets from Japan, we find that the allocative efficiency among survivors declined during the banking crisis period, while the technical efficiency declined during the Global Financial Crisis period. Furthermore, we find that both entrants and exiters were likely to be more efficient than survivors.

Suggested Citation

  • Kaoru Hosono & Miho Takizawa, 2019. "Dynamic Productivity Decomposition with Allocative Efficiency," Working Papers on Central Bank Communication 012, University of Tokyo, Graduate School of Economics.
    • Handle: RePEc:upd:utmpwp:012
    as

    Download full text from publisher

    File URL: https://www.centralbank.e.u-tokyo.ac.jp/wp-content/uploads/2019/09/cb-wp012.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    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. Marc J. Melitz & Sašo Polanec, 2015. "Dynamic Olley-Pakes productivity decomposition with entry and exit," RAND Journal of Economics, RAND Corporation, vol. 46(2), pages 362-375, June.
    3. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 541-585.
    4. 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.
    5. 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.
    6. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1403-1448.
    7. Hyeog Ug Kwon & Futoshi Narita & Machiko Narita, 2015. "Resource Reallocation and Zombie Lending in Japan in the 1990s," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 709-732, October.
    8. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
    9. John Asker & Allan Collard-Wexler & Jan De Loecker, 2014. "Dynamic Inputs and Resource (Mis)Allocation," Journal of Political Economy, University of Chicago Press, vol. 122(5), pages 1013-1063.
    10. Amil Petrin & James Levinsohn, 2012. "Measuring aggregate productivity growth using plant-level data," RAND Journal of Economics, RAND Corporation, vol. 43(4), pages 705-725, December.
    11. 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 1943-1977, December.
    12. Caballero, Ricardo J & Hammour, Mohamad L, 1994. "The Cleansing Effect of Recessions," American Economic Review, American Economic Association, vol. 84(5), pages 1350-1368, December.
    13. Joe Peek & Eric S. Rosengren, 2005. "Unnatural Selection: Perverse Incentives and the Misallocation of Credit in Japan," American Economic Review, American Economic Association, vol. 95(4), pages 1144-1166, September.
    14. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    15. Sophie Osotimehin, 2019. "Aggregate productivity and the allocation of resources over the business cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 32, pages 180-205, April.
    16. Kaoru Hosono & Miho Takizawa & Kotaro Tsuru, 2016. "International Transmission of the 2007–2009 Financial Crisis: Evidence from Japan," The Japanese Economic Review, Japanese Economic Association, vol. 67(3), pages 295-328, September.
    17. Sophie Osotimehin, 2019. "Aggregate productivity and the allocation of resources over the business cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 32, pages 180-205, April.
    18. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-1150, September.
    19. Griliches, Zvi & Regev, Haim, 1995. "Firm productivity in Israeli industry 1979-1988," Journal of Econometrics, Elsevier, vol. 65(1), pages 175-203, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Uchida, Hirofumi, 2020. "Natural selection: A review of studies on firms’ exit and efficiency," MPRA Paper 103938, University Library of Munich, Germany.
    2. Tetsushi Murao, 2017. "Aggregate Productivity Growth Decomposition: an Overview," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 13(3), pages 269-286, November.
    3. Daniel A. Dias & Carlos Robalo Marques, 2021. "Every Cloud Has a Silver Lining: Cleansing Effects of the Portuguese Financial Crisis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(2), pages 352-376, April.
    4. Kaoru Hosono & Miho Takizawa, 2022. "Japan's productivity stagnation: Using dynamic Hsieh–Klenow decomposition," Contemporary Economic Policy, Western Economic Association International, vol. 40(1), pages 218-232, January.
    5. Sophie Osotimehin, 2019. "Aggregate productivity and the allocation of resources over the business cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 32, pages 180-205, April.
    6. Riley, Rebecca & Rosazza-Bondibene, Chiara & Young, Garry, 2015. "The UK productivity puzzle 2008-13: evidence from British businesses," Bank of England working papers 531, Bank of England.
    7. Aradhna Aggarwal & Takahiro Sato, 2011. "Firm Dynamics and Productivity Growth in Indian Manufacturing: Evidence from Plant Level Panel Dataset," Discussion Paper Series DP2011-07, Research Institute for Economics & Business Administration, Kobe University.
    8. Morikawa, Masayuki, 2021. "Productivity of firms using relief policies during the COVID-19 crisis," Economics Letters, Elsevier, vol. 203(C).
    9. Rebecca Riley & Chiara Rosazza Bondibene & Garry Young, 2013. "Productivity Dynamics in the Great Stagnation: Evidence from British businesses," Discussion Papers 1407, Centre for Macroeconomics (CFM), revised Apr 2014.
    10. Redha Fares, 2022. "Bankruptcy, Performance and Market Selection: Evidence from Firms in France," Erudite Ph.D Dissertations, Erudite, number ph22-01 edited by Claude Mathieu.
    11. Sophie Osotimehin, 2019. "Aggregate productivity and the allocation of resources over the business cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 32, pages 180-205, April.
    12. Dan Andrews & Filippos Petroulakis, 2017. "Breaking the Shackles: Zombie Firms, Weak Banks and Depressed Restructuring in Europe," OECD Economics Department Working Papers 1433, OECD Publishing.
    13. Kneller, Richard & McGowan, Danny & Inui, Tomohiko & Matsuura, Toshiyuki, 2012. "Globalisation, multinationals and productivity in Japan’s lost decade," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 110-128.
    14. Elisa Gamberoni & Claire Giordano & Paloma Lopez-Garcia, 2016. "Capital and labour (mis)allocation in the euro area: Some stylized facts and determinants," Questioni di Economia e Finanza (Occasional Papers) 349, Bank of Italy, Economic Research and International Relations Area.
    15. G. Jacob Blackwood & Lucia S. Foster & Cheryl A. Grim & John Haltiwanger & Zoltan Wolf, 2021. "Macro and Micro Dynamics of Productivity: From Devilish Details to Insights," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(3), pages 142-172, July.
    16. Hu, Zhongzhong & Rodrigue, Joel & Tan, Yong & Yu, Chunhai, 2017. "Product churning, reallocation, and Chinese export growth," Journal of Economic Behavior & Organization, Elsevier, vol. 143(C), pages 147-164.
    17. Jeroen Van den bosch & Stijn Vanormelingen, 2023. "Productivity growth over the business cycle: cleansing effects of recessions," Small Business Economics, Springer, vol. 60(2), pages 639-657, February.
    18. Jose Asturias & Sewon Hur & Timothy J. Kehoe & Kim J. Ruhl, 2023. "Firm Entry and Exit and Aggregate Growth," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(1), pages 48-105, January.
    19. Hartwig, Benny & Lieberknecht, Philipp, 2020. "Monetary policy, firm exit and productivity," Discussion Papers 61/2020, Deutsche Bundesbank.
    20. Yojiro Ito & Daisuke Miyakawa, 2022. "Performance of Exiting Firms in Japan: An Empirical Analysis Using Exit Mode Data," IMES Discussion Paper Series 22-E-07, Institute for Monetary and Economic Studies, Bank of Japan.

    More about this item

    Keywords

    Productivity decomposition; Allocative efficiency; Japan.;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:upd:utmpwp:012. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Yayoi Hatano (email available below). General contact details of provider: https://edirc.repec.org/data/fetokjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.