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Patterns of business creation, survival and growth : evidence from Africa

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  • Klapper, Leora
  • Richmond, Christine

Abstract

The authors study firm dynamics using a novel database of all formally registered firms in Cote d'Ivoire from 1977 to 1997, which account for about 60 percent of gross domestic product. First, they examine entry and exit patterns and the role of new and exiting firms versus incumbents in job creation and destruction. They find that while the rate of job creation at new firms is quiet high -- at 8 percent on average -- the number of jobs added by new firms is small in absolute terms. Next, they examine survival rates and find that the probability of survival increases monotonically with firm size, but manufacturing and foreign-owned firms face higher likelihoods of exit compared with service oriented and domestically owned firms. They find that higher growth of gross domestic product increases the probability of firm survival, but this is a broad impact with no firm size disproportionately affected. In robustness checks, they find that after 1987 size is no longer a significant determinant of firm survival for new entrants, suggesting that the operating environment for firms changed. Finally, they find that trade and fiscal reform episodes raised the probability of firm exit and attenuated the survival disadvantages faced by smaller firms, but exchange rate revaluation and pro-private sector reforms did not significantly lower the likelihood of exit.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5828.

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Date of creation: 01 Oct 2011
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Handle: RePEc:wbk:wbrwps:5828

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Keywords: Microfinance; Environmental Economics&Policies; Labor Markets; Small Scale Enterprise; Economic Theory&Research;

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References

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  1. Admasu Shiferaw & Arjun Bedi, 2010. "The Dynamics of Job Creation and Job Destruction: Is Sub-Saharan Africa Different?," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 22, Courant Research Centre PEG.
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  23. Mead, Donald C. & Liedholm, Carl, 1998. "The dynamics of micro and small enterprises in developing countries," World Development, Elsevier, vol. 26(1), pages 61-74, January.
  24. Klapper, Leora & Love, Inessa, 2010. "The impact of business environment reforms on new firm registration," Policy Research Working Paper Series 5493, The World Bank.
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Cited by:
  1. Nasr, Sahar & Rostom, Ahmed, 2013. "SME contributions to employment, job creation, and growth in the Arab world," Policy Research Working Paper Series 6682, The World Bank.
  2. Andrew Kerr & Martin Wittenberg & Jairo Arrow, 2013. "Job Creation and Destruction in South Africa," SALDRU Working Papers 92, Southern Africa Labour and Development Research Unit, University of Cape Town.

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