Article ID Journal Published Year Pages File Type
10437740 Journal of Economic Behavior & Organization 2005 26 Pages PDF
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.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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