The Impacts of Demand and Productivity Shocks on Product Dynamics: Evidence from Japanese Product and Firm Level Data

How do the adding of new products and the dropping of old products by incumbent firms interact with aggregate economic activities over the business cycle? This paper empirically examines the effects of demand and supply shocks on product dynamics by constructing an unique firm-product data set from the Japanese Census of Manufactures. The data are available annually and are more disaggregated than comparable US data, showing that product adding and dropping by incumbent firms contributes to fluc