A Lost Decade Revisited :Zombie Firms and Inefficient Labor Allocation

This paper investigates why labors wouldnft be reallocated from contracting firms to expanding firms in the 1990s in Japan, focusing on the increase of zombie firms after the burst of the bubble economy. Main evidences are twofold. First, higher proportion of total industry labors by zombies impeded labor redeployment from zombies to non-zombies in the industry. Second, labors in zombies wouldnft be readily shifted toward non-zombies irrespective of industry. These results show that the misallocation of credit by way of the increase of zombies was important for the decline of labor reallocation across firms.