Economic Stagnation in Japan
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Economic Stagnation in Japan

Exploring the Causes and Remedies of Japanization

Edited by Dongchul Cho, Takatoshi Ito and Andrew Mason

Japan’s dramatic transformation from economic success to economic stagnation offers important policy lessons to advanced countries everywhere that are struggling with stagnation. The term ‘Japanization’ is often used by economists to describe long-term stagnation and deflation. Symptoms include high unemployment, weak economic activity, interest rates near zero, quantitative easing, and population aging. In the global context, what can governments do to mitigate the downward trends experienced by Japan? This judiciously timed book investigates in depth the causes of Japan’s ‘lost decades’ versus the real recovery achieved by the United States, and the lessons that can be learned.
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Chapter 6: Misallocation in the manufacturing sector of Korea: a micro data analysis

Jiyoon Oh

Abstract

This study evaluates the allocative efficiency in the Korean manufacturing sector following the methodology of Hsieh and Klenow. Overall allocative efficiency has declined from 1990 to 2012. The potential loss from worsening misallocation is estimated at 0.6 percentage point each year, which is considerable in terms of overall total factor productivity. In terms of firm size distribution, large establishments are more likely to expand initially, if distortions are removed in most countries. One notable feature in Korea is that this pattern is pronounced.

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