Productivity Drag from Small and Medium-Sized Enterprises in Japan

Mariana Colacelli and Gee Hee Hong

No 2019/137, IMF Working Papers from International Monetary Fund

Abstract: Productivity growth in Japan, as in most advanced economies, has moderated. This paper finds supportive evidence for the important role of small and medium-sized enterprises (SMEs) in explaining Japan’s modest productivity growth. Results show a substantial dispersion in firm-level productivity growth across sectors and even across firms within the same sector. SMEs, on average, exhibit lower productivity growth than non-SMEs in Japan, with smaller and older SMEs showing particularly low productivity growth. Estimates suggest that boosting productivity growth in all of the worst-performing SMEs could improve overall productivity growth by up to 1.8 percentage points. The SME credit guarantee system, SME financing constraints, demographic factors, and lack of intangible capital investment are discussed as contributors to the slow productivity growth of Japan’s small and old SMEs.

Keywords: WP; productivity growth; firm; SME; SMEs Labor Productivity Growth; Productivity; Firm Dynamics; Small and Medium-Sized Enterprises; Intangible Investment; SME credit guarantee system; financing constraint; SME firm; SME business manager succession; SME credit guarantee program; SME guarantee; laggard SME; exit rate; SME characteristic; sluggish SME productivity growth; Labor productivity; Small and medium enterprises; Intangible capital; Global (search for similar items in EconPapers)
Pages: 21
Date: 2019-07-01
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Citations: View citations in EconPapers (5)

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