Working Paper: NBER ID: w13298
Authors: Tae Okada; Charles Yuji Horioka
Abstract: Nishimura et al. (2005) analyze the entry/exit behavior of Japanese firms during the 1990s and find that relatively efficient firms exited while relatively inefficient firms survived during the banking-crisis period of 1996-97. They conclude that the natural selection mechanism (NSM) apparently malfunctions during severe recessions, but we offer a more plausible interpretation: NSM continued to function effectively even during this period, but aberrant banking practices caused a shift in the type of natural selection from directional to disruptive selection, with the most efficient as well as the least efficient firms being favored and firms of intermediate efficiency being selected against.
Keywords: No keywords provided
JEL Codes: D21; D24; L11; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Aberrant banking practices (G21) | Shift from directional selection to disruptive selection (C92) |
| Forbearance lending and forcible withdrawal of loans (G21) | Aberrant banking practices (G21) |
| Shift from directional selection to disruptive selection (C92) | Favoring of both the most and least efficient firms (D21) |
| Aberrant banking practices (G21) | Non-survival of intermediate firms (D25) |
| Severe recession (E32) | Shift from directional selection to disruptive selection (C92) |
| Natural selection mechanism (NSM) continued to function effectively (C52) | NSM did not malfunction (Y40) |