Small Firm Death in Developing Countries
Small firms are an important source of income for the poor in developing countries, and the target of many interventions designed to help them grow. But there is no systematic information on the failure or death of such firms. The paper puts togeth...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/215441510078083132/Small-firm-death-in-developing-countries http://hdl.handle.net/10986/28855 |
| Summary: | Small firms are an important source of
income for the poor in developing countries, and the target
of many interventions designed to help them grow. But there
is no systematic information on the failure or death of such
firms. The paper puts together 16 panel surveys from 12
different developing countries to develop stylized facts
from over 14,000 firms on how much firm death there is; on
which types of these firms are most likely to die; and on
why they die, paying careful attention to issues of
measurement and attrition. The authors find small firms die
at an average rate of 8.3 percent per year over the first
five years of following them, so that half of all firms
observed to be operating at a given point in time are dead
within 6 years. Death rates are higher for small firms in
richer countries, younger firms, retail firms, less
productive and less profitable firms, and those whose owners
are female and not middle-aged. The paper proposes three
theories of why small firms die: firm competition and firm
shocks, occupational choice, and non-separability from the
household. It finds the cause of firm death to be
heterogeneous, with different subgroups of firms more likely
to die for reasons consistent with each of these theories. |
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