Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries

Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries

In this paper the authors provide an analysis of the process of creative destruction across 24 countries and 2-digit industries over the past decade. They rely on a newly assembled dataset that draws from different micro data sources (business regi...

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Bibliographic Details
Main Authors: Bartelsman, Eric, Haltiwanger, John, Scarpetta, Stefano
Format: Policy Research Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2014
Subjects:
ACCOUNTING
AVERAGE PRODUCTIVITY
BARRIERS TO ENTRY
BASIC METALS
BUSINESS ENVIRONMENT
CAPITAL MARKETS
CIVIL SERVICE
COUNTRY COMPARISONS
DEMOGRAPHICS
DEVELOPING COUNTRIES
ECONOMIC CONDITIONS
EFFICIENCY IMPROVEMENTS
EMPIRICAL EVIDENCE
EXPANSION
FINANCIAL MARKETS
FIRM SIZE
FIRMS
FISHING
FIXED COSTS
FOOD PRODUCTS
FORESTRY
INNOVATION
INSURANCE
LABOR PRODUCTIVITY
MARKET ECONOMIES
MINING
PENSIONS
PETROLEUM
PRODUCERS
PRODUCTION TECHNOLOGY
PRODUCTIVITY
PRODUCTIVITY GROWTH
PROFITABILITY
RECYCLING
RESEARCH AGENDA
SIZE OF FIRMS
SMALL BUSINESSES
SMALL FIRMS
TECHNOLOGICAL CHANGE
TECHNOLOGICAL FACTORS
TRANSITION ECONOMIES
TRANSPORT
TURBULENCE
UNCERTAINTY
UNEMPLOYMENT
VENEZUELA
WATER SUPPLY
Online Access:http://documents.worldbank.org/curated/en/2004/12/5587902/microeconomic-evidence-creative-destruction-industrial-developing-countries
http://hdl.handle.net/10986/17423
Description
Summary:In this paper the authors provide an analysis of the process of creative destruction across 24 countries and 2-digit industries over the past decade. They rely on a newly assembled dataset that draws from different micro data sources (business registers, census, or representative enterprise surveys). The novelty of their approach is in the harmonization of firm-level data across countries, which enables international comparisons and the identification of country-specific factors as opposed to sector and time effects. All countries display a massive reallocation of resources, with the entry and exit of many firms in all markets, the failure of many newcomers and the expansion of successful ones. This process of creative destruction affects productivity directly by reallocating resources toward more productive uses, but also indirectly through the effects of increased market contestability. There are also large differences across groups of countries. While entry and exit rates are fairly similar across industrial countries, post-entry performance differs markedly between Europe and the United States, a potential indication of the importance of barriers to firm growth as opposed to barriers to entry. Transition economies show an even more impressive process of creative destruction and, those that have progressed the most toward a market economy show better outcomes from this process. Finally, Mexico shows large firm dynamics with many new firms entering the battle but also many failing rapidly, while Argentina resembles Continental Europe with smaller flows and less impressive post-entry growth of successful firms.

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