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Size and age of establishments: evidence from developing countries

Author

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  • Ayyagari, Meghana
  • Demirguc-Kunt, Asli
  • Maksimovic, Vojislav

Abstract

Survey data from 120 developing countries are used to examine the relation between establishment size and age in the formal sector. Existing research suggests that manufacturing establishments in developing countries do not grow over time, most likely because of market imperfections and regulations. To the contrary, this paper finds that the average plant in developing countries that is more than 40 years old employs almost five times as many workers as the average plant that is five years old or younger. The analysis finds consistent evidence when it looks within a large country, India, based on detailed manufacturing census data over 23 years. It also finds that differences in financial development across Indian states, while substantial, have a minor effect on firm growth, consistent with inefficiency of state-owned financial systems. These results hold controlling for differences in labor regulations across states, capital intensity, labor regulations, and firms born before and after the major reforms.

Suggested Citation

  • Ayyagari, Meghana & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2013. "Size and age of establishments: evidence from developing countries," Policy Research Working Paper Series 6718, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6718
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    References listed on IDEAS

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    Cited by:

    1. Rijkers, Bob & Arouri, Hassen & Freund, Caroline & Nucifora, Antonio, 2014. "Which firms create the most jobs in developing countries? Evidence from Tunisia," Labour Economics, Elsevier, vol. 31(C), pages 84-102.
    2. Rahman, Aminur, 2014. "Investment climate reforms and job creation in developing countries : what do we know and what should we do ?," Policy Research Working Paper Series 7025, The World Bank.

    More about this item

    Keywords

    Microfinance; Banks&Banking Reform; Scientific Research&Science Parks; Science Education; Labor Markets;

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