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Do crises catalyze creative destruction ? firm-level evidence from Indonesia

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  • Hallward-Driemeier, Mary
  • Rijkers, Bob

Abstract

Using Indonesian manufacturing census data (1991-2001), this paper rejects the hypothesis that the East Asian crisis unequivocally improved the reallocative process. The correlation between productivity and employment growth did not strengthen and the crisis induced the exit of relatively productive firms. The attenuation of the relationship between productivity and survival was stronger in provinces with comparatively lower reductions in minimum wages, but not due to reduced entry, changing loan conditions, or firms connected to the Suharto regime suffering disproportionately. On the bright side, firms that entered during the crisis were relatively more productive, which helped mitigate the reduction in aggregate productivity.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5869.

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Date of creation: 01 Nov 2011
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Handle: RePEc:wbk:wbrwps:5869

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Keywords: Labor Policies; Labor Markets; Banks&Banking Reform; Economic Theory&Research; Microfinance;

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Cited by:
  1. Hallward-Driemeier, Mary & Rijkers, Bob & Waxman, Andrew, 2011. "Ladies first ? firm-level evidence on the labor impacts of the East Asian crisis," Policy Research Working Paper Series 5789, The World Bank.
  2. Klapper, Leora & Richmond, Christine & Tran, Trang, 2013. "Civil conflict and firm performance : evidence from Cote d'Ivoire," Policy Research Working Paper Series 6640, The World Bank.
  3. Guimbert, Stephane & Oostendorp, Remco, 2012. "Weathering the storm : responses by Cambodian firms to the global financial crisis," Policy Research Working Paper Series 6220, The World Bank.

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