Multi-Product Firms and Product Switching in Japan

This paper explores role of multi-product plants and product switching in the Japanese manufacturing sector. While a substantial body of work has explored the importance of the extensive margins of plant entry and exit in employment and output flows, only recently has research begun to examine the adjustment across products within establishments and its importance for plant and aggregate output and employment flows. Using a novel, annual plant-product data set covering all Japanese manufacturing plants with more than 4 employees from 1992 to 2006, we provide the first evidence on the role of multi-product plants in Japanese manufacturing and how the product mix and the plant mix have changed over time. Unlike previous studies we are able to track annual changes in the product mix. The period covers a major decline in manufacturing activity and we show that the mix of products and output shifted strongly towards larger multi-product plants that are part of multi-establishment manufacturing firms