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Industry Switching in Developing Countries

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  • Carol Newman
  • John Rand
  • Finn Tarp

Abstract

Firm turnover (i.e. firm entry and exit) is a well-recognized source of sectorlevel productivity growth across developing and developed countries. In contrast, the role and importance of firms switching activities from one sector to another is little understood. Firm switchers are likely to be unique both from newly established entrants and exiting firms that close down. We build an empirical model that examines switching behaviour based on data from Vietnamese manufacturing firms during the period 2001.08. Our diagnostic shows that switching firms have different characteristics and behaviour as compared to entry and exit firms. They tend, inter alia, to be labour-intensive and seek out competitive opportunities in labour-intensive sectors in response to changes in the market environment. We also show that resource reallocations resulting from switching form an important component of productivity growth.

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File URL: http://www.wider.unu.edu/stc/repec/pdfs/wp2011/wp2011-049.pdf
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Bibliographic Info

Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Working Paper WP2011/49.

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Length: 32 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:unu:wpaper:wp2011-49

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

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References

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  1. Carsten Eckel & J. Peter Neary, 2010. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 188-217.
  2. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
  3. Goldberg, Pinelopi Koujianou & Khandelwal, Amit & Pavcnik, Nina & Topalova, Petia, 2008. "Multi-product Firms and Product Turnover in the Developing World: Evidence from India," CEPR Discussion Papers 6881, C.E.P.R. Discussion Papers.
  4. Eslava, Marcela & Haltiwanger Jr, John C & Kugler, Adriana D. & Kugler, Maurice, 2004. "The Effects of Structural Reforms on Productivity- and Profitability-Enhancing Reallocation: Evidence from Colombia," CEPR Discussion Papers 4569, C.E.P.R. Discussion Papers.
  5. Aw, Bee Yan & Chen, Xiaomin & Roberts, Mark J., 2001. "Firm-level evidence on productivity differentials and turnover in Taiwanese manufacturing," Journal of Development Economics, Elsevier, vol. 66(1), pages 51-86, October.
  6. Disney, Richard F & Haskel, Jonathan & Heden, Ylva, 2000. "Restructuring And Productivity Growth In UK Manufacturing," CEPR Discussion Papers 2463, C.E.P.R. Discussion Papers.
  7. Gary H. Jefferson & Thomas G. Rawski, 1994. "Enterprise Reform in Chinese Industry," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 47-70, Spring.
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Cited by:
  1. Carol Newman & John Rand & Theodore Talbot & Finn Tarp, 2014. "Technology transfers, foreign investment and productivity spillovers: evidence from Vietnam," The Institute for International Integration Studies Discussion Paper Series iiisdp440, IIIS.
  2. Conor O'Toole & Carol Newman, 2012. "Investment Financing and Financial Development: Firm Level Evidence from Vietnam," The Institute for International Integration Studies Discussion Paper Series iiisdp409, IIIS.

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