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Sector Switching: An Unexplored Dimension of Firm Dynamics in Developing Countries

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Author Info
Carol Newman (Trinity College Dublin)
John Rand (Department of Economics, University of Copenhagen)
Finn Tarp (Department of Economics, University of Copenhagen)

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Abstract

Much of the literature on industry evolution has found firm dynamics to be an important source of sector-level productivity growth. In this paper, we ask whether the delineation of entry and exit firms matters in assessing the impact of firm turnover. Using detailed firm level data from Vietnam, it emerges that efficiency differences between sector switchers and exit/entry firms exist. Distinguishing between switchers and firm entry/exit is crucial for understanding the contribution of firm turnover to overall productivity growth. Moreover, we uncover distinct and illuminating firm and sector-level determinants of firm exit and switching, which need to be carefully considered in the search for effective policy.

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Publisher Info
Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 07-22.

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Length: 25 pages
Date of creation: Sep 2007
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Handle: RePEc:kud:kuiedp:0722

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Related research
Keywords: firm dynamics; sector switching; efficiency; Vietnam;

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Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
L6 - Industrial Organization - - Industry Studies: Manufacturing
O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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