1. As the market churns: productivity and firm exit in developing countries.
- Author
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Aga, Gemechu and Francis, David
- Subjects
INDUSTRIAL productivity ,LOW-income countries ,INTERNATIONAL trade ,BANKRUPTCY ,ECONOMIC conditions in developing countries - Abstract
This paper uses a unique dataset from the World Bank's Enterprise Surveys in 47 economies to analyze the conditions under which firms leave heterogeneous markets. Consistent with expectations, we show that firm productivity (and age) are significant determinants of firm exit. Cross-country analysis shows, however, that the relationship between productivity as well as age and exit is mitigated by some country-level factors. In particular, we show either's effect is substantially weakened in low-income economies, economies with limited openness to international trade, and in economies with cumbersome bankruptcy procedures. To address issues of sample attrition and selection bias presented by survey-based estimates, corrections are applied using information when a firm's operating status is uncertain. The expected negative relationship between firm labor productivity and the likelihood of exit is robust to these corrections, as is the negative relationship between firm exit and age. [ABSTRACT FROM AUTHOR]
- Published
- 2017
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