Exit in Developing Countries: Economic Reforms and Plant Heterogeneity
AbstractSeveral studies have found that plant turnover contributes to productivity growth. This evidence seems to be consistent with the idea that, by reducing protection granted to inefficient firms, economic liberalization would generate productivity gains associated with resource reallocation from less productive to more productive firms. However, little empirical work has been done directly linking economic liberalization and plant exit. This paper uses Chilean reforms to shed light on their effects on plant exit. Our econometric analysis shows that larger and more productive plants are less likely to exit. After controlling for these characteristics, we also find that exit is more likely in export-oriented industries. Moreover, we find a differential impact of economic liberalization and exchange rate fluctuations. Changes in these variables have a more significant impact on less productive and smaller plants. By industry, we find that the plants that are most affected are those in export-oriented sectors.
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Bibliographic InfoPaper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 506.
Date of creation: Dec 2008
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- Roberto Álvarez & Sebastián Vergara, 2010. "Exit in Developing Countries: Economic Reforms and Plant Heterogeneity," Economic Development and Cultural Change, University of Chicago Press, vol. 58(3), pages 537-561, 04.
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- Aldaba, Rafaelita M., 2012. "Surviving Trade Liberalization in Philippine Manufacturing," Discussion Papers DP 2012-10, Philippine Institute for Development Studies.
- Fernandes, Ana M. & Paunov, Caroline, 2012. "The risks of innovation : are innovating firms less likely to die ?," Policy Research Working Paper Series 6103, The World Bank.
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