Hostname: page-component-78c5997874-s2hrs Total loading time: 0 Render date: 2024-11-19T02:07:32.406Z Has data issue: false hasContentIssue false
  • English
  • Français

PAYMENT UNCERTAINTY AND THE PRODUCTIVITY SLOWDOWN

Published online by Cambridge University Press:  19 March 2007

KEIICHIRO KOBAYASHI
KEIICHIRO KOBAYASHI
Affiliation:
The Research Institute of Economy, Trade and Industry
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper proposes a simple theory to explain the productivity slowdown observed in Japan during the 1990s. Under a forbearance policy by the government toward nonperforming loans, one keeping insolvent firms afloat, other economic agents become exposed to a higher risk of not being paid by their customers (payment uncertainty). It is shown that the payment uncertainty, working through a competitive market, causes an endogenous decline in the number of firms that are involved in the production of one good. Resulting disruptions of the division of labor among firms lower macroeconomic productivity. The performance of the model is compared with that of the Japanese economy in the 1990s.

Keywords

Payment UncertaintyProductivityDivision of LaborJapan's Lost Decade
Type
ARTICLES
Information
Macroeconomic Dynamics , Volume 11 , Issue 2 , April 2007 , pp. 231 - 248
Copyright
© 2007 Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Andolfatto David 2003 Monetary implications of the Hayashi-Prescott hypothesis for Japan. Bank of Japan Monetary and Economic Studies 21 (4), 1– 20.Google Scholar
Baumgardner James R. 1988 The division of labor, local markets, and worker organization. Journal of Political Economy 96 (3), 509– 527.Google Scholar
Becker Gary S. and Kevin M. Murphy 1992 The division of labor, coordination costs, and knowledge. Quarterly Journal of Economics 107 (4), 1137– 1160.Google Scholar
Blanchard Olivier and Michael Kremer 1997 Disorganization. Quarterly Journal of Economics 112 (4), 1091– 1126.Google Scholar
Calvo Guillermo A. 2000. Balance-of-payment crises in emerging markets: Large capital inflows and sovereign governments. In Paul Krugman (ed.), Currency Crises. Chicago: University of Chicago Press.
Hayashi Fumio and Edward C. Prescott 2002 The 1990s in Japan: A lost decade. Review of Economic Dynamics 5 (1), 206– 235.Google Scholar
Hosono Kaoru and Tsutomu Watanabe 2002 Corporate balance sheets and monetary policy. Keizai Kenkyu 53 (2), 117– 133. (in Japanese)Google Scholar
Jorgenson Dale W. and Kazuyuki Motohashi 2003 Economic Growth of Japan and the United States in the Information Age. RIETI discussion paper series 03-E-015, Research Institute of Economy, Trade, and Industry.Google Scholar
Kawamoto Takuji 2004 What Do the Purified Solow Residuals Tell Us About Japan's Lost Decade? IMES discussion paper 2004-E-5, Bank of Japan.Google Scholar
Kim Sunwoong 1989 Labor specialization and the extent of the market. Journal of Political Economy 97 (3), 692– 705.Google Scholar
Kiyotaki Nobuhiro and John Moore 1997 Credit Chains. Mimeo, London School of Economics.
Kobayashi Keiichiro 1998 The Division of Labor, the Extent of the Market, and Economic Growth. Ph.D. Dissertation, University of Chicago.
Kobayashi Keiichiro 2004 A theory of debt disorganization. Journal of Restructuring Finance 1 (1), 1– 11.Google Scholar
Kobayashi Keiichiro and Masaru Inaba 2005 Debt disorganization in Japan. Japan and the World Economy 17, 151– 169.Google Scholar
Lamont Owen 1995 Corporate-debt overhang and macroeconomic expectations. American Economic Review 85 (5), 1106– 1117.Google Scholar
Ministry of Economy, Trade, and Industry 2004a Survey of corporate rehabilitation plans and their achievements. http://www.meti.go.jp/policy/jigyou_saisei/ (in Japanese).
Ministry of Economy, Trade, and Industry 2004b Survey of civil rehabilitation plans and their achievements. http://www.meti.go.jp/policy/jigyou_saisei/ (in Japanese).
Miyagawa Tsutomu 2003 The lost decade and changes in the industrial structure. In Kikuo Iwata and Tsutomu Miyagawa (eds.), Ekonomikkusu: Ushinawareta 10 nen no shin-in ha nanika (What Is the Real Cause of the Lost Decade?). Tokyo: Toyo Keizai Shinposha (in Japanese).
Romer Paul M. 1987 Growth based on increasing returns due to specialization. American Economic Review 77 (2), 56– 62.Google Scholar
Smith Adam 1776 An Inquiry into the Nature and Causes of the Wealth of Nations. Reprint, 1963. Homewood, IL: Richard D Irwin, Inc..
Teikoku Data Bank 2001a Average repayment ratio of general debt is 24.2% in corporate rehabilitations. TDB Watching (in Japanese).
Teikoku Data Bank 2001b Average repayment ratio of general debt is 27.3% in civil rehabilitation processes. TDB Watching (in Japanese).