Premium
Are Losers Picked? An Empirical Analysis of Capacity Divestment and Production Reallocation in the J apanese Cement Industry
Author(s) -
Nishiwaki Masato,
Kwon Hyoeg Ug
Publication year - 2013
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12019
Subject(s) - divestment , allocative efficiency , industrial organization , production (economics) , capacity utilization , drop (telecommunication) , economics , business , cement , natural resource economics , microeconomics , engineering , telecommunications , archaeology , history , finance
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 J apanese 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.