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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.

Suggested Citation

  • Hallward-Driemeier, Mary & Rijkers, Bob, 2011. "Do crises catalyze creative destruction ? firm-level evidence from Indonesia," Policy Research Working Paper Series 5869, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5869
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    References listed on IDEAS

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    Citations

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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. Carlos Carreira & Paulino Teixeira, 2016. "Entry and exit in severe recessions: lessons from the 2008–2013 Portuguese economic crisis," Small Business Economics, Springer, vol. 46(4), pages 591-617, April.
    3. Dias, Daniel A. & Robalo Marques, Carlos & Richmond, Christine, 2016. "Misallocation and productivity in the lead up to the Eurozone crisis," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 46-70.
    4. Noy, Ilan & Patel, Pooja, 2014. "Floods and spillovers: Households after the 2011 great flood in Thailand," Working Paper Series 3609, Victoria University of Wellington, School of Economics and Finance.
    5. repec:bla:rdevec:v:21:y:2017:i:4:p:1018-1056 is not listed on IDEAS
    6. Hashiguchi, Yoshihiro & Higashikata, Takayuki, 2017. "Human capital externalities in Indonesian cities," IDE Discussion Papers 672, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    7. Sînâ T. Ateş & Felipe E. Saffie, 2014. "Fewer but Better: Sudden Stops, Firm Entry, and Financial Selection," PIER Working Paper Archive 14-043, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    8. Ilke Van Beveren & Stijn Vanormelingen, 2014. "Human capital, firm capabilities and productivity growth," Working Paper Research 257, National Bank of Belgium.
    9. 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.
    10. Aloysius Gunadi Brata & Henri (H.L.F.) de Groot & Wouter (W.) Zant, 2018. "Shaking Up the Firm Survival: Evidence from Yogyakarta (Indonesia)," Tinbergen Institute Discussion Papers 18-021/VIII, Tinbergen Institute.
    11. Wahida Ahmad & David Prentice, 2015. "How large are productivity differences between Islamic and Conventional Banks?," Discussion Papers 2015/09, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    12. Spaliara, Marina-Eliza & Tsoukas, Serafeim, 2013. "What matters for corporate failures in Asia? Exploring the role of firm-specific characteristics during the Asian crisis," Structural Change and Economic Dynamics, Elsevier, vol. 26(C), pages 83-96.
    13. repec:kap:sbusec:v:49:y:2017:i:2:d:10.1007_s11187-016-9817-7 is not listed on IDEAS
    14. 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.
    15. repec:bla:revinw:v:63:y:2017:i:2:p:310-334 is not listed on IDEAS

    More about this item

    Keywords

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

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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