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Entry-exit, learning, and productivity change : evidence from Chile

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  • Liu, Lili
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    Abstract

    This paper applies econometric techniques from the efficiency frontiers literature and the panel data literature to construct plant-specific time-variant technical efficiency indices for surviving, exiting, and entering cohorts. These are then used to compare productivity growth rates across plant cohorts and to examine the net effect of plant turnover and learning patterns on manufacturing-wide productivity growth. The analysis is based on plant-level panel data from Chile covering the period 1979-86. For several reasons, these data provide an excellent basis for inference. First, they include all Chilean manufacturing plants with at least 10 workers. Second, from 1974 to 1979 Chile underwent sweeping reform programs to liberalize its trade regime, privatize state firms, and deregulate markets. The author finds the importance of plant turnover and different learning patterns across cohorts in driving the Chilean manufacturing-wide productivity changes. She finds that: the evidence supports the hypothesis that competitive pressures force less efficient producers to fail more often than others; the ratio of skilled labor to unskilled labor is higher and increasing more rapidly among incumbents and entrants than among exiting plants; although the economywide recession affected the productivity of each cohort to different degrees, there are steady increases in productivity over the sample period.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 769.

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    Date of creation: 30 Sep 1991
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    Handle: RePEc:wbk:wbrwps:769

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    Keywords: Environmental Economics&Policies; Economic Theory&Research; Health Monitoring&Evaluation; Banks&Banking Reform; Industrial Management;

    References

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    1. Mark J. Roberts & James R. Tybout, 1991. "Size Rationalization and Trade Exposure in Developing Countries," NBER Chapters, in: Empirical Studies of Commercial Policy, pages 169-200 National Bureau of Economic Research, Inc.
    2. Varian, Hal R, 1984. "The Nonparametric Approach to Production Analysis," Econometrica, Econometric Society, vol. 52(3), pages 579-97, May.
    3. Havrylyshyn, Oli, 1990. "Trade Policy and Productivity Gains in Developing Countries: A Survey of the Literature," World Bank Research Observer, World Bank Group, vol. 5(1), pages 1-24, January.
    4. Pack, Howard, 1988. "Industrialization and trade," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 9, pages 333-380 Elsevier.
    5. Tybout, James & de Melo, Jaime & Corbo, Vittorio, 1990. "The effects of trade reforms on scale and technical efficiency : new evidence from Chile," Policy Research Working Paper Series 481, The World Bank.
    6. Corbo, Vittorio & de Melo, Jaime & Tybout, James, 1986. "What Went Wrong with the Recent Reforms in the Southern Cone," Economic Development and Cultural Change, University of Chicago Press, vol. 34(3), pages 607-40, April.
    7. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-44, June.
    8. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
    9. Schmidt, Peter & Sickles, Robin C, 1984. "Production Frontiers and Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 367-74, October.
    10. Nelson, Richard R, 1981. "Research on Productivity Growth and Productivity Differences: Dead Ends and New Departures," Journal of Economic Literature, American Economic Association, vol. 19(3), pages 1029-64, September.
    11. Cornwell, Christopher & Schmidt, Peter & Sickles, Robin C., 1990. "Production frontiers with cross-sectional and time-series variation in efficiency levels," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 185-200.
    12. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
    13. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    14. Pitt, Mark M. & Lee, Lung-Fei, 1981. "The measurement and sources of technical inefficiency in the Indonesian weaving industry," Journal of Development Economics, Elsevier, vol. 9(1), pages 43-64, August.
    15. Seiford, Lawrence M. & Thrall, Robert M., 1990. "Recent developments in DEA : The mathematical programming approach to frontier analysis," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 7-38.
    16. Baldwin, John R. & Gorecki, Paul K., 1987. "Plant creation versus plant acquisition : The entry process in canadian manufacturing," International Journal of Industrial Organization, Elsevier, vol. 5(1), pages 27-41, March.
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    1. repec:phd:rpseri:rps_1994-06 is not listed on IDEAS
    2. Jaramillo, Fidel & Schiantarelli, Fabio & Weiss, Andrew, 1993. "The effect of financial liberalization on allocation of credit : panel data evidence for Ecuador," Policy Research Working Paper Series 1092, The World Bank.

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