Effects of aggregate shocks on productivity of farm households in prewar Japan: Evidence from the great depression in rural Japan
2016
Fujie, T. (Meiji University (Japan)) | Senda, T.
An economic crisis can be considered as a man-made disaster with the characteristics of an aggregate shock, thus complicating and hindering mutual insurance or help in local communities. This paper investigates the dynamics of productivity in prewar rural Japan and who were more vulnerable to the Great Depression, as a representative example of aggregate shocks that seriously impacted rural sectors. First, using panel data for farm households collected by the Imperial Agricultural Association (Teikoku Nokai), we measured the Malmquist productivity index and decomposed it into technical and efficiency change for the period 1924-1933. Second, with this panel data, we investigated which farm household was more vulnerable to aggregate shocks. Our main findings are as follows. First, although the Malmquist productivity index decreased rapidly after the Great Depression occurred, due to the technical and efficiency change, this rapid productivity decrease was temporary. Second, the vulnerability of farm households to aggregate shocks differed across regions, and large-scale farmers were relatively robust to them. These differences in the vulnerability across farm size might have triggered the structural changes to prewar agriculture after the Great Depression. Our findings shed light on the dynamics of farm household behavior in prewar Japan from micro and quantitative perspectives.
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