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Product switching and the business cycle

Bernard, Andrew B. and Okubo, Toshihiro (2016) Product switching and the business cycle. CEP Discussion Paper (1432). Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

This paper explores role of product adding and dropping within manufacturing firms over the business cycle. While a substantial body of work has explored the importance of the extensive margins of firm entry and exit in employment and output flows, only recently has research begun to examine the adjustment across products within firms and its importance for firm and aggregate output and employment flows. Using a novel, annual firm-product data set covering all Japanese manufacturing firms with more than 4 employees from 1992 to 2006, we provide the first evidence on annual changes in product adding and dropping by continuing firms over the business cycle. We find very high rates of product adding and dropping by continuing firms between the last year of the recession and the first year of the subsequent expansion and offer an explanation and supporting evidence based on a “trapped factors” model of firm behavior.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2016 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
JEL classification: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L21 - Business Objectives of the Firm
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification and Scope, Age, Profit, and Sales
L - Industrial Organization > L6 - Industry Studies: Manufacturing > L60 - General
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 09 Sep 2016 11:16
Last Modified: 20 Nov 2019 04:57
Funders: Economic and Social Research Council, Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/67660

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