Do Crises Catalyze Creative Destruction? Firm-level Evidence from Indonesia
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...
| 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_20111102102529 http://hdl.handle.net/10986/3635 |
| Summary: | 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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