Productivity, returns to scale and product differentiation in the retail trade industry: An empirical analysis using Japanese firm-level data

Atsuyuki Kato

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

This paper examines productivity and returns to scale under the assumption of monopolistic competition using Japanese firm-level data. Although differentiating products (services) is considered important in firms' strategies and productivity growth, it has not been sufficiently investigated in previous studies. In this paper, we study this issue in two retail trade industries, department stores and supermarkets, applying the model of Melitz (2000). Our results indicate that the standard production function is not relevant to estimate productivity in imperfectly competitive markets. It also suggests that the market structure should be carefully considered in productivity analysis. In addition, product differentiation has a positive effect on firms' revenue for the supermarkets. Furthermore, the retail trade industries possibly follow increasing returns to scale. Thus, policy measures that promote economies of scale and product differentiation should contribute to further growth in these industries. In addition, the results indicate that the regulatory reform of the retail trade industry in 2000 increased the gap between winners and losers in terms of productivity.

Original languageEnglish
Pages (from-to)345-353
Number of pages9
JournalJournal of Productivity Analysis
Volume38
Issue number3
DOIs
Publication statusPublished - 2012 Dec
Externally publishedYes

Keywords

  • Increasing returns to scale
  • Monopolistic competition
  • Product differentiation
  • Productivity
  • Regulatory reform

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Social Sciences (miscellaneous)

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