Entry, Exit, and Productivity of Indonesian Electronics Manufacturing Plants
AbstractWe study the link between plant turnover and productivity using Indonesian plant-level data for the period of 1990-95. First, we compare productivity differentials among incumbents, entrants, and exiting plants by constructing the Farrell technical efficiency index using data envelopment analysis. We test the significance of these differentials using Simar and Wilson (1998) bootstrap algorithm and Li’s (1996) nonparametric test of closeness between unknown distributions. We find that the incumbent plants are on average the most productive group in every year of the estimation period. Also, the new plants are relatively less productive than the exiting plants in the early years. However, they are more productive than the exiting plants in the later years. Second, and more importantly, we estimate the productivity change during the study period using the Malmquist productivity change index and decompose the change to see if the differences in measured productivity change among the three groups of plants come from differences in the efficiency change or the technical change. Since the existing literature rarely distinguishes between these two different components, little is known whether exiting plants are less productive because of their inability to catch up to the current frontier or to adopt a better technology. Similarly, not much known whether entrants’ ability to survive come from their being equipped with a ’better’ technology or being able to catch up to the current frontier. Our findings indicate that although new plants enter with relatively lower productivity levels, they exhibit the highest productivity change during the early years. In addition, we find entrants’ high productivity growth in the early period is due to a movement toward the frontier, while in the later period is due to an upward shift of the technology frontier. Exiting plants, on the other hand, exhibit the lowest productivity change during the early years when entrants experience high productivity change.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2006n08.
Length: 24 pages
Date of creation: Apr 2006
Date of revision:
Contact details of provider:
Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
Web page: http://www.melbourneinstitute.com/
More information through EDIRC
Find related papers by JEL classification:
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-04-29 (All new papers)
- NEP-CSE-2006-04-29 (Economics of Strategic Management)
- NEP-EFF-2006-04-29 (Efficiency & Productivity)
- NEP-ENT-2006-04-29 (Entrepreneurship)
- NEP-SEA-2006-04-29 (South East Asia)
- NEP-TID-2006-04-29 (Technology & Industrial Dynamics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Oulton,Nicholas & O'Mahony,Mary, 1994. "Productivity and Growth," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521453455.
- SIMAR, LÃ©opold & WILSON, Paul, 1995.
"Sensitivity Analysis to Efficiency Scores : How to Bootstrap in Nonparametric Frontier Models,"
CORE Discussion Papers, UniversitÃ© catholique de Louvain, Center for Operations Research and Econometrics (CORE)
1995043, UniversitÃ© catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- LÃ©opold Simar & Paul W. Wilson, 1998. "Sensitivity Analysis of Efficiency Scores: How to Bootstrap in Nonparametric Frontier Models," Management Science, INFORMS, INFORMS, vol. 44(1), pages 49-61, January.
- Simar, L. & Wilson, P.W., . "Sensitivity analysis of efficiency scores: how to bootstrap in nonparametric frontier models," CORE Discussion Papers RP -1304, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Simar, Leopold & Wilson, Paul W., 1999.
"Estimating and bootstrapping Malmquist indices,"
European Journal of Operational Research, Elsevier,
Elsevier, vol. 115(3), pages 459-471, June.
- SIMAR, LÃ©opold & WILSON, Paul, 1996. "Estimating and bootstrapping malmquist indices," CORE Discussion Papers, UniversitÃ© catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1996060, UniversitÃ© catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- David H. Good & M. Ishaq Nadiri & Robin C. Sickles, 1996.
"Index Number and Factor Demand Approaches to the Estimation of Productivity,"
NBER Working Papers
5790, National Bureau of Economic Research, Inc.
- Good, D. & Nadiri, M.I. & Sickles, R., 1996. "Index Number and Factor Demand Approaches to the Estimarion of Productivity," Working Papers, C.V. Starr Center for Applied Economics, New York University 96-34, C.V. Starr Center for Applied Economics, New York University.
- Fare, Rolf & Shawna Grosskopf & Mary Norris & Zhongyang Zhang, 1994. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries," American Economic Review, American Economic Association, American Economic Association, vol. 84(1), pages 66-83, March.
- Bee Yan Aw & Sukkyun Chung & Mark J. Roberts, 1998. "Productivity and the Decision to Export: Micro Evidence from Taiwan and South Korea," NBER Working Papers 6558, National Bureau of Economic Research, Inc.
- repec:att:wimass:8904 is not listed on IDEAS
- Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, Econometric Society, vol. 50(3), pages 649-70, May.
- Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 62(1), pages 53-82, January.
- Mark Doms & Eric J. Bartelsman, 2000.
"Understanding Productivity: Lessons from Longitudinal Microdata,"
Journal of Economic Literature,
American Economic Association, vol. 38(3), pages 569-594, September.
- Eric J. Bartelsman & Mark Doms, 2000. "Understanding productivity: lessons from longitudinal microdata," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2000-19, Board of Governors of the Federal Reserve System (U.S.).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (James Davis).
If references are entirely missing, you can add them using this form.