Endogenous selection of producers, asset prices, and productivity slowdown

Hajime Tomura*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This paper presents a simple heterogeneous agent model to show that shocks that reduce aggregate borrowing capacity of producers under borrowing constraints cause endogenous productivity slowdowns through declines in asset prices and biased selections of producers. These dynamics of the model replicate the qualitative features of the Japanese economy during the 1990s, including a decline in the within effect in total factor productivity growth decomposition as well as default on mortgage loans. Policy experiments demonstrate that foreclosure restrictions already in place mitigate an exogenous productivity slowdown, but that a tightening of foreclosure restrictions causes an endogenous productivity slowdown.

Original languageEnglish
Pages (from-to)104-130
Number of pages27
JournalJapanese Economic Review
Issue number1
Publication statusPublished - 2012 Mar 1
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics


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