Are Losers Picked? An Empirical Analysis of Capacity Divestment and Production Reallocation in the Japanese Cement Industry

38 Pages Posted: 12 Jul 2013

See all articles by Masato Nishiwaki

Masato Nishiwaki

Waseda University - Waseda Institute for Advanced Study

Hyoeg Ug Kwon

Nippon University - Department of Economics

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Date Written: June 2013

Abstract

As demand in an industry shrinks, pressure for the reduction of capacity arises. A key issue is whether plants which, from an efficiency perspective, should reduce output in fact do so. Focusing on the Japanese cement industry, we examine whether less efficient plants reduce capacity. We find that less efficient firms are not more likely to reduce capacity than more efficient firms; however, less efficient plants within a multi‐plant firm are more likely to reduce capacity than more efficient plants. In addition, we find that this divestment pattern has led to a substantial drop in industry‐wide allocative efficiency.

Suggested Citation

Nishiwaki, Masato and Kwon, Hyoeg Ug, Are Losers Picked? An Empirical Analysis of Capacity Divestment and Production Reallocation in the Japanese Cement Industry (June 2013). The Journal of Industrial Economics, Vol. 61, Issue 2, pp. 430-467, 2013. Available at SSRN: https://ssrn.com/abstract=2292818 or http://dx.doi.org/10.1111/joie.12019

Masato Nishiwaki (Contact Author)

Waseda University - Waseda Institute for Advanced Study ( email )

1-6-1 Nishi-Waseda
Shinjuku-ku
Tokyo, 1698050
Japan

Hyoeg Ug Kwon

Nippon University - Department of Economics ( email )

4-8-24, Kudanminami
Chiyoda-ku, Tokyo
Japan

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