Creative Destruction and Policy Reforms : Changing Productivity Effects of Firm Turnoverin Moroccan Manufacturing
How important is firm turnover to national productivity growth? The literature points to the contribution of creative destruction being strongest in more developed countries or where market institutions are strongest. This paper looks at the case o...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091020160355 http://hdl.handle.net/10986/4277 |
| Summary: | How important is firm turnover to
national productivity growth? The literature points to the
contribution of creative destruction being strongest in more
developed countries or where market institutions are
strongest. This paper looks at the case of Morocco, spanning
16 years, during which reform initiatives aiming to
strengthen market forces were introduced. The paper argues
that it is important to take into account i) the timing of
how decompositions are structured (capturing the effects of
high growth among young firms as part of the benefit of
increased entry) and ii) the additional indirect impacts of
firm dynamics on agglomeration externalities and
competition. The paper shows there are striking differences
in the productivity paths of entering and exiting firms
compared with incumbents, and that restricting the time
horizon of productivity decompositions to the actual year of
entry or exit underestimates the productivity effects of
turnover. Although it has been hypothesized that conducting
decompositions over longer horizons would increase the
positive contribution of net turnover, this is not the case
in Morocco as losses from exiting firms rise too. Nor has
the net contribution of turnover increased with market
reforms; if anything, the contribution has declined over
time. But the allocation of resources has improved. Both
technical and allocative efficiency have risen since the
mid-1990s. The paper also shows that firm turnover affects
productivity through additional channels. It is closely
correlated with measures of agglomeration that are
associated with higher rates of exit among unproductive
firms, and turnover itself is positively associated with
subsequent productivity growth of incumbents. |
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