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Competition, Firm Turnover and Productivity Growth

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  • Baldwin, John R. Gu, Wulong

Abstract

This paper investigates the extent to which productivity growth is the result of firm turnover as output is shifted from one firm to another, driven by the competitive process. Turnover occurs as some firms gain market share and others lose it. Some of the resulting turnover is due to entry and exit. Another part arises from growth and decline in incumbent continuing firms. This paper proposes a method for measuring the impact of firm turnover on productivity growth and shows that it is far more important than many previous empirical studies have concluded. It argues that firm turnover associated with competition is the main source of aggregate labour productivity growth in Canadian manufacturing industries.

Suggested Citation

  • Baldwin, John R. Gu, Wulong, 2006. "Competition, Firm Turnover and Productivity Growth," Economic Analysis (EA) Research Paper Series 2006042e, Statistics Canada, Analytical Studies Branch.
    • Handle: RePEc:stc:stcp5e:2006042e
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    File URL: http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=11F0027M2006042&lang=eng
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    References listed on IDEAS

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    4. John Haltiwanger, 1997. "Measuring and analyzing aggregate fluctuations: the importance of building from microeconomic evidence," Review, Federal Reserve Bank of St. Louis, issue May, pages 55-78.
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    Cited by:

    1. John Stanley Metcalfe & Ronnie Ramlogan, 2006. "Creative Destruction and the Measurement of Productivity Change," Revue de l'OFCE, Presses de Sciences-Po, vol. 97(5), pages 373-397.
    2. Ben Tomlin & Loretta Fung, 2015. "Exchange Rate Movements and the Distribution of Productivity," Review of International Economics, Wiley Blackwell, vol. 23(4), pages 782-809, September.
    3. Suzanne Kok & Nicole Bosch & Anja Deelen & Rob Euwals, 2011. "Migrant Women on the Labour Market," CPB Discussion Paper 180.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    4. J. Stan Metcalfe & John Foster, 2010. "Evolutionary Growth Theory," Chapters, in: Mark Setterfield (ed.), Handbook of Alternative Theories of Economic Growth, chapter 3, Edward Elgar Publishing.
    5. World Bank Group, 2016. "Malaysia Economic Monitor, December 2016," World Bank Publications - Reports 25857, The World Bank Group.
    6. Dan Andrews & Filippos Petroulakis, 2017. "Breaking the Shackles: Zombie Firms, Weak Banks and Depressed Restructuring in Europe," OECD Economics Department Working Papers 1433, OECD Publishing.
    7. Viktoria Kocsis & Victoria Shestalova & Henry van der Wiel & Nick Zubanov & Ruslan Lukach & Bert Minne, 2009. "Relation entry, exit and productivity: an overview of recent theoretical and empirical literature," CPB Document 180, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Mr. Ravi Balakrishnan, 2008. "Canadian Firm and Job Dynamics," IMF Working Papers 2008/031, International Monetary Fund.
    9. Florian Noseleit, 2013. "Entrepreneurship, structural change, and economic growth," Journal of Evolutionary Economics, Springer, vol. 23(4), pages 735-766, September.
    10. Asma Raies, 2013. "Firm entry and aggregate efficiency growth: An optimal dynamic - Program of entry and R&D investment," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 10(3), pages 355-376, December.
    11. Paul Boothe & Richard Roy, 2008. "Business Sector Productivity in Canada: What Do We Know?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 16, pages 3-13, Spring.
    12. Tomlin, Ben, 2014. "Exchange rate fluctuations, plant turnover and productivity," International Journal of Industrial Organization, Elsevier, vol. 35(C), pages 12-28.
    13. Fabling, Richard & Grimes, Arthur & Sanderson , Lynda & Stevens, Philip, 2008. "Some Rise by Sin, and Some by Virtue Fall: Firm Dynamics, Market Structure and Performance," Occasional Papers 08/1, Ministry of Economic Development, New Zealand.
    14. Dan Andrews & Chiara Criscuolo & Peter Gal & Carlo Menon, 2015. "Firm Dynamics and Public Policy: Evidence from OECD Countries," RBA Annual Conference Volume (Discontinued), in: Angus Moore & John Simon (ed.),Small Business Conditions and Finance, Reserve Bank of Australia.
    15. Kim, Byung Woon & Park, Joonho & Youl Ko, Chang, 2013. "Cost allocation of WCDMA and wholesale pricing for mVoIP and data services," Telecommunications Policy, Elsevier, vol. 37(1), pages 35-47.
    16. Pedro Carvalho, 2018. "Competition and Firm Productivity: Evidence from Portugal," GEE Papers 00108, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Jul 2018.
    17. Viktoria Kocsis & Victoria Shestalova & Henry van der Wiel & Nick Zubanov & Ruslan Lukach & Bert Minne, 2009. "Relation entry, exit and productivity: an overview of recent theoretical and empirical literature," CPB Document 180.rdf, CPB Netherlands Bureau for Economic Policy Analysis.

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    Keywords

    Business performance and ownership; Economic accounts; Entry; exit; mergers and growth; Productivity accounts;
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