As the market churns: productivity and firm exit in developing countries

As the market churns: productivity and firm exit in developing countries This paper uses a unique dataset from the World Bank’s Enterprise Surveys in 47 economies to analyze the conditions under which firms leave heterogeneous markets. Consistent with expectations, we show that firm productivity (and age) are significant determinants of firm exit. Cross-country analysis shows, however, that the relationship between productivity as well as age and exit is mitigated by some country-level factors. In particular, we show either’s effect is substantially weakened in low-income economies, economies with limited openness to international trade, and in economies with cumbersome bankruptcy procedures. To address issues of sample attrition and selection bias presented by survey-based estimates, corrections are applied using information when a firm’s operating status is uncertain. The expected negative relationship between firm labor productivity and the likelihood of exit is robust to these corrections, as is the negative relationship between firm exit and age. Small Business Economics Springer Journals

As the market churns: productivity and firm exit in developing countries

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Springer US
Copyright © 2017 by Springer Science+Business Media New York
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
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