Misallocation and Establishment Dynamics

The fraction of exporters and multinational enterprises (MNEs) varies substantially across industries. We extend the firm heterogeneity model presented by Helpman et al. (2004) to derive testable predictions about the prevalence of these internationalized modes. The model indicates that intra-industry firm heterogeneity and R&D intensity play large roles in inter-industry variation of the fraction of internationalized firms. We investigate whether these factors as well as import tariffs affect the structure of exports and foreign direct investment (FDI) using Japanese industry-level data. We obtain results that are consistent with the model. First, industries with larger productivity dispersion have a larger fraction of MNEs and a larger fraction of the sum of exporters and MNEs. Second, MNEs are heavily concentrated in R&D-intensive industries. In addition, we reveal that industries with lower import tariffs have a larger fraction of exporters and MNEs.

Journal of The Japanese and International Economies, 2005

Growth and Productivity in East Asia, 2004

1. The JIP Database has been compiled by us (the four authors of this paper), several economists at ESRI, and graduate students from Keio, Hitotsubashi, Tsukuba, and other universities as part of an ESRI research project. The result of this project is reported in K. . The database contains annual information on eighty-four sectors, including forty-nine nonmanufacturing sectors, from 1970 to 1998. These sectors cover the whole Japanese economy. The database includes detailed information on factor inputs, annual nominal and real input-output tables, and some additional statistics, such as research and development (R&D) stock, capacity utilization rate, Japan's international trade statistics by trade partner, inward and outward FDI, and so on at the detailed sectoral level. An Excel file version (in Japanese) of the JIP Database is available at <http://www.esri.go.jp/en/archive/ bun/abstract/bun170index-e.html>.

2007

This paper employs nonparametric tests and Japanese firm level data to examine the hypothesis put forward by Helpman, Melitz and Yeaple (2003) and Head and Ries (2003) that firms engaging in FDI are more productive than other firms. We find that the productivity distribution of foreign firms operating in Japan dominates that of Japanese multinationals, which dominates that of exporters, which in turn dominates that of non-exporters, thus confirming the theoretical predictions.

2004

1. The JIP Database has been compiled by us (the four authors of this paper), several economists at ESRI, and graduate students from Keio, Hitotsubashi, Tsukuba, and other universities as part of an ESRI research project. The result of this project is reported in K. . The database contains annual information on eighty-four sectors, including forty-nine nonmanufacturing sectors, from 1970 to 1998. These sectors cover the whole Japanese economy. The database includes detailed information on factor inputs, annual nominal and real input-output tables, and some additional statistics, such as research and development (R&D) stock, capacity utilization rate, Japan's international trade statistics by trade partner, inward and outward FDI, and so on at the detailed sectoral level. An Excel file version (in Japanese) of the JIP Database is available at <http://www.esri.go.jp/en/archive/ bun/abstract/bun170index-e.html>.

SSRN Electronic Journal, 2000

The 1990s have been a decade of minimal growth for the Japanese economy. Examining this record from a growth accounting perspective, this paper argues that a major factor underlying Japan's disappointing growth performance in recent years has been a marked slow-down in total factor productivity (TFP) growth. It is suggested that, given present population trends and low returns on capital, any sustained increase in overall economic growth will require an acceleration in TFP growth. In this context, foreign direct investment (FDI) can potentially make an important contribution by increasing the degree of competition in the economy and, if foreign firms are more productive than domestic ones, by raising average TFP levels in Japanese industry.

In this paper we explore formally the relative importance of the various elements of the hollowing-out hypothesis and whether globalisation and multinationals have contributed to Japan’s recent soporific economic performance. Using a micro level dataset allows us to address the contribution of productivity improvements within firms, as well as that which occurs from the entry and exit of firms and the reallocation of market shares across firms. We do not find that multinationals have closed relatively productive plants. Instead poor within firm productivity growth has been responsible. Unlike in other countries Japanese plant survival is unaffected by imports from low-wage countries; rather imports slow productivity growth.

Japanese Economic Review, 2006

This study analyses the cause of the slowdown in Japan's TFP growth during the 1990s. Many preceding studies, examining the issue at the macro- or industry-level, have found that the slowdown was primarily due to the stagnation in TFP growth in the manufacturing sector. Using firm level panel data covering the entire sector, we investigate the causes of the TFP slowdown and find that the reallocation of resources from less efficient to more efficient firms was very slow and limited. This “low metabolism” seems to be an important cause for the slowdown in Japan's TFP growth.

2012

During the recent decade of declining foreign direct investment (FDI) barriers, small domestic firms disproportionately contracted while large multinational firms experienced a substantial growth in Japan's manufacturing sector. This paper quantitatively assesses the impact of FDI globalization on intra-industry reallocations and its implications for aggregate productivity. We calibrate the firm-heterogeneity model of Eaton, Kortum, and Kramarz (2011) to micro-level data on Japanese multinational firms facing fixed and variable costs of foreign production. Estimating the structural parameters of the model, we demonstrate that the model can strongly replicate entry and sales patterns of Japanese multinationals. Counterfactual simulations show that declining FDI barriers lead to a disproportionate expansion of foreign production by more efficient firms relative to less efficient firms. A hypothetical 20% reduction in FDI barriers yields a 30.7% improvement in aggregate productivity.

Review of Economic Dynamics, 2008

We formulate a version of the growth model in which production is carried out by heterogeneous establishments and calibrate it to US data. In the context of this model we argue that differences in the allocation of resources across establishments that differ in productivity may be an important factor in accounting for crosscountry differences in output per capita. In particular, we show that policies which create heterogeneity in the prices faced by individual producers can lead to sizeable decreases in output and measured total factor productivity (TFP) in the range of 30 to 50 percent. We show that these effects can result from policies that do not rely on aggregate capital accumulation or aggregate relative price differences. More generally, the model can be used to generate differences in capital accumulation, relative prices, and measured TFP.