Productivity dynamics in Japan and the negative exit effect

Abstract

AbstractPrevious studies on productivity dynamics in Japan have suggested that one of the reasons for sluggish productivity growth in the economy was that highly productive firms exit the market, giving rise to a negative exit effect. This study is the first using census data and a large‐scale micro data set to verify the negative exit effect in Japan. We conduct analyses of productivity dynamics using the micro data. The results show that there is indeed a negative exit effect in Japan and that this is driven mainly by the exit of a small number of highly productive firms.