Do Crises Catalyze Creative Destruction? [electronic resource] : Firm-Level Evidence from Indonesia / Hallward-Driemeier, Mary
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TextPublication details: Washington, D.C., The World Bank, 2011Description: 1 online resource (55 p.)Subject(s): Banks & Banking Reform | Capital market imperfections | Creative destruction | Economic Theory & Research | Financial crisis | Firm survival | Labor Markets | Labor Policies | Macroeconomics and Economic Growth | Microfinance | Productivity decompositionsAdditional physical formats: Hallward-Driemeier, Mary.: Do Crises Catalyze Creative Destruction?Online resources: Click here to access online Abstract: Using Indonesian manufacturing census data (1991-2001), this paper rejects the hypothesis that the East Asian crisis unequivocally improved the reallocative process. The correlation between productivity and employment growth did not strengthen and the crisis induced the exit of relatively productive firms. The attenuation of the relationship between productivity and survival was stronger in provinces with comparatively lower reductions in minimum wages, but not due to reduced entry, changing loan conditions, or firms connected to the Suharto regime suffering disproportionately. On the bright side, firms that entered during the crisis were relatively more productive, which helped mitigate the reduction in aggregate productivity.
Using Indonesian manufacturing census data (1991-2001), this paper rejects the hypothesis that the East Asian crisis unequivocally improved the reallocative process. The correlation between productivity and employment growth did not strengthen and the crisis induced the exit of relatively productive firms. The attenuation of the relationship between productivity and survival was stronger in provinces with comparatively lower reductions in minimum wages, but not due to reduced entry, changing loan conditions, or firms connected to the Suharto regime suffering disproportionately. On the bright side, firms that entered during the crisis were relatively more productive, which helped mitigate the reduction in aggregate productivity.
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