Japan's productivity stagnation: Using dynamic Hsieh-Klenow decomposition

This study provides a new perspective on Japan's stagnant aggregate productivity by extending the Hsieh and Klenow (2009) framework to account for productivity growth, entry and exit, and product variety change. We measure the technical efficiency (TE) and allocative efficiency (AE) by the aggregate production possibility frontier and the distance from the frontier, respectively. We apply our approach to establishment- and firm-level data sets from Japan and find that the AE among survivors declined during the banking crisis period, while the TE declined during the global financial crisis period.

Automated summary

This study extends the Hsieh and Klenow framework to analyze Japan's stagnant aggregate productivity, finding that allocative efficiency among survivors declined during the banking crisis period, while technical efficiency declined during the global financial crisis period.