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...

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Main Authors: McKenzie, David, Paffhausen, Anna Luisa
Format: Working Paper
Language:English
Published: World Bank, Washington, DC 2017
Subjects:
Online Access:http://documents.worldbank.org/curated/en/215441510078083132/Small-firm-death-in-developing-countries
http://hdl.handle.net/10986/28855
id okr-10986-28855
recordtype oai_dc
spelling okr-10986-288552021-06-08T14:42:47Z Small Firm Death in Developing Countries McKenzie, David Paffhausen, Anna Luisa FIRM DEATH MICROENTERPRISE SMALL AND MEDIUM ENTERPRISE SMALL FIRMS 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. 2017-11-14T21:59:39Z 2017-11-14T21:59:39Z 2017-11 Working Paper http://documents.worldbank.org/curated/en/215441510078083132/Small-firm-death-in-developing-countries http://hdl.handle.net/10986/28855 English Policy Research Working Paper;No. 8236 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic FIRM DEATH
MICROENTERPRISE
SMALL AND MEDIUM ENTERPRISE
SMALL FIRMS
spellingShingle FIRM DEATH
MICROENTERPRISE
SMALL AND MEDIUM ENTERPRISE
SMALL FIRMS
McKenzie, David
Paffhausen, Anna Luisa
Small Firm Death in Developing Countries
relation Policy Research Working Paper;No. 8236
description 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.
format Working Paper
author McKenzie, David
Paffhausen, Anna Luisa
author_facet McKenzie, David
Paffhausen, Anna Luisa
author_sort McKenzie, David
title Small Firm Death in Developing Countries
title_short Small Firm Death in Developing Countries
title_full Small Firm Death in Developing Countries
title_fullStr Small Firm Death in Developing Countries
title_full_unstemmed Small Firm Death in Developing Countries
title_sort small firm death in developing countries
publisher World Bank, Washington, DC
publishDate 2017
url http://documents.worldbank.org/curated/en/215441510078083132/Small-firm-death-in-developing-countries
http://hdl.handle.net/10986/28855
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