Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries

Bartelsman, Eric; Haltiwanger, John; Scarpetta, Stefano

Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries

Autores

Bartelsman, Eric

Haltiwanger, John

Scarpetta, Stefano

Editor

World Bank, Washington, DC

Descripción

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.

Palabras clave

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