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Competition, selection, and productivity growth in the Chilean manufacturing industry

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  • Roberto Álvarez
  • Aldo Gonzalez

Abstract

Competition is considered as a key driver of productivity growth. However, the empirical evidence on its impact is scant in developing countries. Using information from manufacturing plants for the period 1995–2007, we analyze the impact of competition on firm selection and productivity growth in Chile. Our results indicate that competition has a positive effect on total factor productivity (TFP) growth, especially for laggard firms. We find weaker evidence that competition affects the probability of exit for low-productivity firms. In general, these results for productivity growth are robust to alternative methodologies for calculating productivity and to the inclusion of other variables that may affect firms’ TFP growth. We find support for Schumpeterian forces, but the quantitative impact is small.

Suggested Citation

  • Roberto Álvarez & Aldo Gonzalez, 2020. "Competition, selection, and productivity growth in the Chilean manufacturing industry," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 29(3), pages 877-892.
    • Handle: RePEc:oup:indcch:v:29:y:2020:i:3:p:877-892.
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    Cited by:

    1. Benavente, Jose Miguel & Zuniga, Pluvia, 2021. "How does market competition affect firm innovation incentives in emerging countries? Evidence from Latin American firms," MERIT Working Papers 2021-024, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    2. Benavente, José Miguel & Zuñiga, Pluvia, 2022. "How Does Market Competition Affect Firm Innovation Incentives in Emerging Countries? Evidence from Chile and Colombia," IDB Publications (Working Papers) 12198, Inter-American Development Bank.

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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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