Why Do Inefficient Firms Survive? Management and Economic Development
AbstractThere are large and persistent productivity differences across firms within narrowly defined industries. This is especially true in poor countries. Why do productivity differences decline as the economy develops? In this paper I propose a theory where productivity differences exist because different firms use different technologies. The negative correlation between economic development and productivity dispersion occurs because the set of economically viable techniques shrinks as the economy develops. My mechanism stresses the role of managerial inputs. If managers are essential to increase the scale of production, inefficient techniques survive in managerial-scarce economies as productive firms do not have the means to replace them. As the aggregate supply of managers increases, efficient firms expand, best-practice technologies dominate the industry and productivity differences decline. Using firm-level panel data from Chile, I test both cross-sectional and time-series implications of the theory and evaluate different approaches of how to introduce management in firmsâ€™ production function.
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 Society for Economic Dynamics in its series 2012 Meeting Papers with number 497.
Date of creation: 2012
Date of revision:
Contact details of provider:
Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-13 (All new papers)
- NEP-DEV-2013-04-13 (Development)
- NEP-EFF-2013-04-13 (Efficiency & Productivity)
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.:
- Allan Collard-Wexler & John Asker & Jan De Loecker, 2011.
"Productivity Volatility and the Misallocation of Resources in Developing Economies,"
NBER Working Papers
17175, National Bureau of Economic Research, Inc.
- Asker, John & Collard-Wexler, Allan & De Loecker, Jan, 2011. "Productivity volatility and the misallocation of resources in developing economies," CEPR Discussion Papers 8469, C.E.P.R. Discussion Papers.
- Allan Collard-Wexler & John Asker & Jan De Loecker, 2011. "Productivity Volatility and the Misallocation of Resources in Developing Economies," Working Papers 11-13, New York University, Leonard N. Stern School of Business, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.