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Industry Switching in Developing Countries

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  • Carol Newman
  • John Rand
  • Finn Tarp

Abstract

Firm turnover (i.e. firm entry and exit) is a well-recognized source of sectorlevel productivity growth across developing and developed countries. In contrast, the role and importance of firms switching activities from one sector to another is little understood. Firm switchers are likely to be unique both from newly established entrants and exiting firms that close down. We build an empirical model that examines switching behaviour based on data from Vietnamese manufacturing firms during the period 2001.08. Our diagnostic shows that switching firms have different characteristics and behaviour as compared to entry and exit firms. They tend, inter alia, to be labour-intensive and seek out competitive opportunities in labour-intensive sectors in response to changes in the market environment. We also show that resource reallocations resulting from switching form an important component of productivity growth.

Suggested Citation

  • Carol Newman & John Rand & Finn Tarp, 2011. "Industry Switching in Developing Countries," WIDER Working Paper Series 049, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:wp2011-49
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    References listed on IDEAS

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    1. Eslava, Marcela & Haltiwanger, John & Kugler, Adriana & Kugler, Maurice, 2004. "The effects of structural reforms on productivity and profitability enhancing reallocation: evidence from Colombia," Journal of Development Economics, Elsevier, vol. 75(2), pages 333-371, December.
    2. Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Restructuring and productivity growth in uk manufacturing," Economic Journal, Royal Economic Society, vol. 113(489), pages 666-694, July.
    3. Pinelopi K Goldberg & Amit K Khandelwal & Nina Pavcnik & Petia Topalova, 2010. "Multiproduct Firms and Product Turnover in the Developing World: Evidence from India," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 1042-1049, November.
    4. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
    5. Carsten Eckel & J. Peter Neary, 2010. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 188-217.
    6. Aw, Bee Yan & Chen, Xiaomin & Roberts, Mark J., 2001. "Firm-level evidence on productivity differentials and turnover in Taiwanese manufacturing," Journal of Development Economics, Elsevier, vol. 66(1), pages 51-86, October.
    7. Gary H. Jefferson & Thomas G. Rawski, 1994. "Enterprise Reform in Chinese Industry," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 47-70, Spring.
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    Cited by:

    1. Nguyen, Huong, 2016. "Ease of Doing Business Reforms in Vietnam: Implications for Total Factor Productivity in Manufacturing Industries," Papers 999, World Trade Institute.
    2. repec:eee:eecrev:v:101:y:2018:i:c:p:250-267 is not listed on IDEAS
    3. Carol Newman & John Rand & Finn Tarp, 2016. "Imports, supply chains, and firm productivity," WIDER Working Paper Series 090, World Institute for Development Economic Research (UNU-WIDER).
    4. Newman, Carol & Rand, John & Talbot, Theodore & Tarp, Finn, 2015. "Technology transfers, foreign investment and productivity spillovers," European Economic Review, Elsevier, vol. 76(C), pages 168-187.
    5. Doan, Quang Hung & Vu, Hoang Nam & Dao, Ngoc Tien, 2013. "Sub-National Institutions and Firm Survival in Vietnam," MPRA Paper 63653, University Library of Munich, Germany.
    6. Feijoo, Claudio & Gómez-Barroso, José-Luis & Aguado, Juan-Miguel & Ramos, Sergio, 2012. "Mobile gaming: Industry challenges and policy implications," Telecommunications Policy, Elsevier, vol. 36(3), pages 212-221.
    7. Carol Newman & John Rand & Finn Tarp, 2016. "Imports, supply chains, and firm productivity," Working Paper Series UNU-WIDER Working Paper w, World Institute for Development Economic Research (UNU-WIDER).
    8. Carol Newman & John Rand & Theodore Talbot & Finn Tarp, 2014. "Technology transfers, foreign investment and productivity spillovers: evidence from Vietnam," The Institute for International Integration Studies Discussion Paper Series iiisdp440, IIIS.
    9. Newman, Carol & Rand, John & Tarp, Finn & Trifkovic, Neda, 2018. "The transmission of socially responsible behaviour through international trade," European Economic Review, Elsevier, vol. 101(C), pages 250-267.
    10. Conor O'Toole & Carol Newman, 2012. "Investment Financing and Financial Development: Firm Level Evidence from Vietnam," The Institute for International Integration Studies Discussion Paper Series iiisdp409, IIIS.
    11. Carol Newman & John Rand & Finn Tarp & Neda Trifkovic, 2016. "Corporate social responsibility in a competitive business environment," WIDER Working Paper Series 007, World Institute for Development Economic Research (UNU-WIDER).
    12. Roy, Jayjit & Yasar, Mahmut, 2015. "Energy efficiency and exporting: Evidence from firm-level data," Energy Economics, Elsevier, vol. 52(PA), pages 127-135.
    13. Pierrick Baraton & Florian Léon, 2016. "Financial Constraint, Entrepreneurship and Sectoral Migrations ," CREA Discussion Paper Series 16-09, Center for Research in Economic Analysis, University of Luxembourg.

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    Keywords

    firm dynamics; sector switching; efficiency; Vietnam;

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