Measuring productivity dynamics in Japan: a quantile approach

• Published in: Empirical economics 2022-07, Vol.63 (1), p.201-242
• Main Authors: Adachi, Yusuke, Ogawa, Hikaru, Tsubuku, Masafumi
• Format: Article
• Language: English
• Subjects: Decomposition; Econometrics; Economic crisis; Economic theory; Economic Theory/Quantitative Economics/Mathematical Methods; Economics; Economics and Finance; Finance; Hypotheses; Insurance; Management; Productivity; Recessions; Stagnation; Statistics for Business; Survival analysis
• ISSN: 0377-7332; 1435-8921
• DOI: 10.1007/s00181-021-02136-x

This paper presents an approach for estimating changes in firms’ productivity. We apply the quantile approach, which estimates the changes in the productivity distribution of surviving firms. Using this method, the paper clarifies productivity dynamics in terms of both average change and dispersion in Japan from 1987 to 2014. The main results of the analysis are as follows: During a boom or normal period, the productivity distribution shifts to the right and the productivity dispersion decreases. Conversely, during a recession, the productivity distribution shifts to the left and the productivity dispersion expands. The analysis also gives quantitatively significant results. During the historically rare global financial crisis of 2008, the weighted (simple) average of manufacturing productivity in Japan fell by only 0.2% (5.4%). We identified that this counter-intuitive result was due to a significant change in the shape of the productivity distribution and found that the crisis would reduce productivity by more than 22% if the effects of changing the shape of the distribution were adjusted.