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Mobility Barriers and the Speed of Market Selection

  • Werner Hölzl

    (WIFO)

This paper studies the influence of mobility barriers on industry evolution using the stylised pure selection model developed by Metcalfe. It is shown that mobility barriers influence industry dynamics by reducing the speed of competitive selection. Based on the theoretical model, we argue that mobility barriers should lead to a reduction of market share reallocation dynamics in models that use replicator dynamics. We then test this prediction empirically, finding that industries with high mobility barriers have a larger share of stable firms that grow or decline only marginally, compared to industries with low mobility barriers. This has important implications for the interpretation of productivity decompositions. Our empirical results show that higher mobility barriers result in a lower contribution of reallocation to aggregate productivity growth in Austrian manufacturing industries.

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Paper provided by WIFO in its series WIFO Working Papers with number 437.

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Length: 24 pages
Date of creation: 01 Oct 2012
Date of revision:
Handle: RePEc:wfo:wpaper:y:2012:i:437
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  1. Mueller, Dennis C, 1977. "The Persistence of Profits above the Norm," Economica, London School of Economics and Political Science, vol. 44(176), pages 369-80, November.
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  13. Alex Coad, 2010. "Exploring the processes of firm growth: evidence from a vector auto-regression," Industrial and Corporate Change, Oxford University Press, vol. 19(6), pages 1677-1703, December.
  14. Werner Hölzl & Peter Huber, 2009. "An Anatomy of Firm Level Job Creation Rates over the Business Cycle," WIFO Working Papers 348, WIFO.
  15. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers 91, Princeton, Department of Economics - Financial Research Center.
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  17. repec:dgr:uvatin:20040114 is not listed on IDEAS
  18. Audretsch, David B, 1991. "New-Firm Survival and the Technological Regime," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 441-50, August.
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  29. repec:idb:brikps:59978 is not listed on IDEAS
  30. Mitsukuni Nishida & Amil Petrin & Sašo Polanec, 2011. "Explaining Reallocation's Apparent Negative Contribution to Growth," LICOS Discussion Papers 29911, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
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