Productivity and Characteristics of Firms: An application of a bootstrapped data envelopment analysis to Japanese firm-level data

This paper examines the relationships between productivity growth and characteristics of firms using Japanese firm-level data during the period 1995-2004. Applying a bootstrapped Malmquist index approach and weighted least squares (WLS) to two retail trade industries, we estimate the firm-level productivity growth rates and the effects of firms' characteristics on those growth rates. In addition, decomposing productivity growth into technical efficiency change and technical progress, we discuss mechanisms of productivity growth in detail. Our estimation reveals that productivity growth of department stores and supermarkets was stagnant during the sample period. It also indicates that positive technical efficiency changes are usually offset by technical regress and vice versa. Furthermore, effects of firms' characteristics on both productivity components are sometimes conflicting as well. In view of these findings, industrial policies should be carefully devised, based upon their efficiency distribution.