30-09-2013, 04:06 PM
Market Dynamics and Productivity in Japanese Retail Industry in the late 1990s
Dynamics and Productivity .pdf (Size: 290.71 KB / Downloads: 25)
Introduction
According to the report from McKinsey Global Institute, the productivity level of
Japanese retail industry was only half of that in the United States in 1997. The main
argument is that there are too many small and inefficient retailers in Japan, which can
operate in the market relying on various policies to support SMEs. Safety net policy for
failing SMEs is important to avoid social costs associated with their bankruptcy, but it
may have a negative effect on industrial dynamism and productivity growth. In addition,
Large-scale Retailer Store Law, which works as an entry barrier for large retailers into
the market, also hindered market competition.
However, this Law had been gradually modified facing the pressure from the United
States to lower structural non-trade barriers, and it was abolished finally in 1998.
In
this process, large international retailers, such as Toysarus, have opened its outlet
throughout Japan, which provides competitive pressure to existing surrounding
retailers. According to the retail and wholesale census data, consistent decline of the
number of retail establishments is found in 1990’s. A main factor for this trend is
decreasing number of small retailers, such as Pap and Mum type family businesses.
CONCLUSION
In this paper, a role of market dynamism in aggregated productivity growth is
investigated, based on micro data from Retail and Wholesale Census in Japan. From
1997 to 2002, the number of retail establishment decreases from 1,393,275 to 1,122,563.
However, gross establishment turnover by entry and exit is much larger than this net
figure of net change. In this process, substantial number of employment reallocation is
found.
Aggregated labor productivity growth from 1997 to 2002 has been decomposed into the
contribution of continuing, entry and exit establishments. Continuing ones’ productivity
can be further decomposed into within, between and cross terms. Although aggregated
labor productivity dropped sharply from 1997 to 2002, positive contributions from
between and exit components are found. Market dynamics of employment reallocation
within continuing establishments as well as exit of lower productivity retailers has
positive impact on aggregated productivity. On the other hand, entry establishments
are lower in productivity, which leads to negative contribution in entry term.