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Resource Reallocation and Zombie Lending in Japan in the 1990s

Hyeog Ug Kwon (), Futoshi Narita () and Machiko Narita ()

Review of Economic Dynamics, 2015, vol. 18, issue 4, 709-732

Abstract: We investigate how resources were reallocated in Japan during the 1990s, a decade of economic recession, by measuring aggregate productivity growth (APG) using plant-level data of manufacturers from 1981 to 2000. We find that the contribution to APG of resource reallocation deteriorated in the 1990s and became negative during the late 1990s, when a financial crisis occurred. Matched firm-plant data suggest that misdirected lending by banks to failing firms (zombie lending) allowed them to avoid reducing production inputs, especially labor. Our counter-factual analysis using a general equilibrium model with heterogeneous plants indicates that without zombie lending, annual APG would have been higher by one percentage point during the 1990s. (Copyright: Elsevier)

Keywords: Japan; Plant-level data; Productivity; Proxy estimation; Resource reallocation; Zombie lending (search for similar items in EconPapers)
JEL-codes: E23 E32 G21 O47 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1016/

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