Productivity, Markup, Scale Economies, and the Business Cycle: Estimates from firm-level panel data in Japan

Author Name KIYOTA Kozo  (Faculty of Business Administration, Yokohama National University)
Creation Date/NO. July 2010 10-E-040
Research Project Productivity of Industries and Firms and Japanese Economic Growth
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This paper examines the relationship between productivity, markup, scale economies, and the business cycle. The paper contributes to the literature by presenting a simple econometric framework that permits simultaneous estimation of the changes in productivity, markup, and scale economies from a panel of firm-level data. The framework is then applied to Japanese firm-level data for 1994-2006. The results indicate that productivity is procyclical even after the changes in markup and scale economies are controlled for. However, both markup and scale economies are neither procyclical nor countercyclical once the changes in productivity are taken into account.