Mind the Neighbors : The Impact of Productivity and Location on Firm Turnover

This paper examines the impact of firm productivity and local industrial structure on firm entry and exit in Morocco between 1985 and 2001. There is strong evidence of productivity exerting a market-cleansing role. Less productive firms are found t...

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Bibliographic Details
Main Authors:	Hallward-Driemeier, Mary, Thompson, Fraser
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCOUNTING AGGLOMERATION EFFECTS AGGREGATE PRODUCTIVITY AGGREGATE PRODUCTIVITY GROWTH AVERAGE PRODUCTIVITY BOOK VALUE BOUNDARIES BUSINESS ENVIRONMENT CASUAL WORKER CASUAL WORKERS COMPETITIVE PRESSURES COMPETITORS CORPORATION CORPORATIONS CREATIVE DESTRUCTION CULTURAL CHANGE DECISION-MAKING DEVELOPMENT ECONOMICS DISCOUNT RATE DISCUSSION DIVISION OF LABOR DOWNSIZING ECONOMETRICS ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC STRUCTURE ECONOMICS ECONOMIES OF SCALE EMPLOYEE EMPLOYMENT ENTREPRENEURS ENTRY RATE EXIT EQUATIONS EXPORT MARKETS EXPORTS EXTERNALITIES FIRM DYNAMICS FIRM ENTRY FIRM EXIT FIRM LEVEL FIRM PERFORMANCE FIRM PRODUCTIVITY FIRM SIZE FIRM SURVEY FIRM SURVIVAL FIRM TURNOVER FIRMS FORECASTS FOREIGN DIRECT INVESTMENT FOREIGN OWNERSHIP FOREIGN PARTNERS FUTURE RESEARCH GROWTH RATE HIGH WAGE IDEAS INNOVATION INNOVATIONS INSIGHTS INTERNATIONAL TRADE LABOR ECONOMICS LABOR MARKETS LABOUR LABOUR MARKETS LARGE ENTERPRISES LEADING LEARNING MACROECONOMIC FLUCTUATIONS MACROECONOMICS MANUFACTURERS MANUFACTURING ENTERPRISE MANUFACTURING ESTABLISHMENTS MONOPOLISTIC COMPETITION PECUNIARY EXTERNALITIES POLITICAL ECONOMY PRIVATE SECTOR PRODUCT INNOVATION PRODUCT MARKETS PRODUCTION FACILITIES PRODUCTIVE FIRMS PRODUCTIVITY PRODUCTIVITY EFFECTS PRODUCTIVITY GROWTH PRODUCTIVITY LEVEL PRODUCTIVITY LEVELS PROFIT EXPECTATIONS PROFITABILITY PROPERTY RIGHTS PROPORTIONAL HAZARD MODEL PROPRIETORSHIP SCALE EFFECT SCALE EFFECTS SMALL FIRM SMALL FIRMS SUNK COSTS TELECOMMUNICATIONS TEMPORARY WORKER TEMPORARY WORKERS TOTAL EMPLOYMENT TOTAL FACTOR PRODUCTIVITY TOTAL WORKERS TRADE LIBERALIZATION WAGES WEALTH
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_20091031144309 http://hdl.handle.net/10986/4294

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Summary:	This paper examines the impact of firm productivity and local industrial structure on firm entry and exit in Morocco between 1985 and 2001. There is strong evidence of productivity exerting a market-cleansing role. Less productive firms are found to be more likely to exit - and locations with more productive firms attract higher rates of new firm entry. The effect of productivity operates not only in an absolute sense; a firm s relative productivity or distance to the local sector frontier matters too. First, large productivity gaps are associated with higher rates of exit, while new firms are attracted to locations with small productivity gaps. Second, local competition increases the probability of exit, although it does not encourage entry. Third, there is evidence of scale or agglomeration effects that increase firm turnover. Fourth, measures of sector diversity are not associated with lower turnover. Fifth, the geographic level at which agglomeration and competition effects are defined matters differently for exit than entry. For exit, the provincial measures are strong, while those for communes are weaker. For entry, it is the local productivity at the commune level that is more significant. This implies that competitive pressures are less geographically constrained while the potential benefits of agglomeration and spill-overs are indeed more local.

Mind the Neighbors : The Impact of Productivity and Location on Firm Turnover

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