Excess Capacity and Effectiveness of Policy Interventions: Evidence from the cement industry

Tetsuji Okazaki, Ken Onishi and Naoki Wakamori

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Excess production capacity has been a major concern in many countries, in particular, when an industry faces declining demand. Strategic interaction among firms might delay efficient scrappages of production capacity, and policy interventions that eliminate such strategic incentives may improve efficiency. This paper empirically studies the effectiveness of policy interventions in such environment, using plant-level data on the Japanese cement industry. Our estimation results show that a capacity coordination policy that forces firms to reduce their excessive production capacity simultaneously can effectively reduce excess capacity without distorting firms' scrappage decisions or increasing the market power of the firms.

Pages: 31 pages
Date: 2018-03
New Economics Papers: this item is included in nep-com, nep-ind and nep-reg
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Citations: View citations in EconPapers (1)

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https://www.rieti.go.jp/jp/publications/dp/18e012.pdf (application/pdf)

Related works:
Journal Article: EXCESS CAPACITY AND EFFECTIVENESS OF POLICY INTERVENTIONS: EVIDENCE FROM THE CEMENT INDUSTRY (2022)
Working Paper: Excess Capacity and Effectiveness of Policy Interventions: Evidence from the Cement Industry (2018)
Working Paper: Excess Capacity and Effectiveness of Policy Interventions: Evidence from the Cement Industry (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:18012

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