ECONOMICS OF THE LIVING DEAD*

Zombie firms are those firms that are insolvent and have little hope of recovery but avoid failure thanks to support from their banks. This paper identifies zombie firms in Japan, and compares the characteristics of zombies to other firms. Zombie firms are found to be less profitable, more indebted, more dependent on their main banks, more likely to be found in non‐manufacturing industries and more often located outside large metropolitan areas. Overall, larger size makes the firm less likely to be a zombie, but among small firms, relatively larger firms are more likely to be protected and become zombies. Controlling for profitability, the exit probability for zombie firms does not differ from that for non‐zombies. Zombie firms tend to increase employment by more (but do not reduce employment by more) than non‐zombies. Finally, when the proportion of zombie firms in an industry increases, job creation declines and job destruction increases, and the effects are stronger for non‐zombies.     

EDUCATIONAL GENDER INEQUALITY AND INVERTED U‐SHAPED FERTILITY DYNAMICS*

In this article, we examine the dynamic interactions between narrowing educational gender inequality and inverted U‐shaped fertility dynamics by constructing a two‐period overlapping generations model that includes both sexes. In the early stage of development, neither male subjects nor female subjects are educated. At some period, male subjects begin to be educated, whereas female subjects remain uneducated. At this stage, the male subjects' education levels, as well as the fertility rates, gradually increase over time. Fertility achieves a peak just before the onset of the female subject's education. Subsequently, fertility steadily decreases over time. Gender inequality in education also decreases during periods of fertility decline.     

Debt Policy Rules in an Open Economy

In a small open economy model of endogenous growth with public capital accumulation, we examine the effects of a debt policy rule under which the government must reduce its debt–GDP ratio if it exceeds the criterion level. To sustain public debt at a finite level, the government should adjust public spending rather than the income tax rate. The long‐run debt–GDP ratio should be kept sufficiently low to avoid equilibrium indeterminacy. Under sustainability and determinacy, a tighter (looser) debt rule brings welfare gains when the world interest rate is relatively high (low).     

TECHNOLOGICAL PROGRESS AND POPULATION GROWTH: DO WE HAVE TOO FEW CHILDREN?

Do we have too few children? We intend to address this question. In developed countries, the fertility rate has declined since WWII. This may cause a slowdown in the growth of GDP in developed countries. However, important factors for the well‐being of individuals are per capita variables, like per capita growth and per capita consumption. In turn, the rate of technological progress determines the growth rates of per capita variables. If the population size is increasing, the labour inputs for R&D activity increase, and thus speed up technological progress. As individuals do not take account of this positive effect when deciding on the number of their own children, the number of children may become smaller than the socially optimal number of children. However, an increase in the number of children reduces the assets any one child owns: that is, there is a capital dilution effect. This works in the opposite direction. We examine this issue using an endogenous growth model where the head of a dynastic family decides the number of children.