Globalisation, multinationals and productivity in Japan’s lost decade

This paper studies the process of plant exit and productivity growth in Japan during the ‘lost decade’. A productivity decomposition shows the low rate of productivity growth at the aggregate level to be due to slow within plant productivity growth and a small contribution from the entry and exit components. We find the causes of plant exit to be similar to results in other country contexts except we find no effect from import competition. Our results suggest that the low productivity growth is attributable to high entry barriers and little to the shutting of productive plants by MNEs.

► In this paper we study Japan’s lost decade. ► Productivity decomposition analysis shows this is due to low plant exit and low productivity growth within firms. ► The type of firms that exit are as expected small and have low productivity, but import competition has no effect. ► Firm productivity is low because of import competition. ► Entry barriers are a reason for low aggregate productivity growth in Japan.