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 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.

Bibliographic Details

Main Authors:	Hallward-Driemeier, Mary, Rijkers, Bob
Language:	English
Published:	2011-11-01
Subjects:	ACCOUNTING, ADJUSTMENT PROCESS, AGGREGATE PRODUCTIVITY, AGGREGATE PRODUCTIVITY GROWTH, ALLOCATIVE EFFICIENCY, AVERAGE PRODUCTIVITY, AVERAGE PRODUCTIVITY GROWTH, BANKING CRISES, BANKS, BUSINESS CYCLE, BUSINESS CYCLES, CAPITAL MARKET, COMPARATIVE ANALYSIS, COMPARATIVE ECONOMICS, COMPETITIVE PRESSURE, COMPETITIVENESS, CONGLOMERATE, CONGLOMERATES, CREATIVE DESTRUCTION, CRISES, DEFLATORS, DEMOCRACY, DEVALUATION, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, ECONOMETRICS, ECONOMIC GROWTH, ECONOMIC INTEGRATION, ECONOMIC RESEARCH, EMPLOYEE, EMPLOYMENT, EMPLOYMENT GROWTH, EMPLOYMENT TURNOVER, ENTREPRENEURS, ENTRY RATE, EQUILIBRIUM UNEMPLOYMENT, EXPANSION, EXPORTS, FINANCIAL CRISES, FINANCIAL CRISIS, FIRM DYNAMICS, FIRM ENTRY, FIRM EXIT, FIRM GROWTH, FIRM PRODUCTIVITY, FIRM SIZE, FIRM SURVIVAL, FIRM TURNOVER, FIRM-LEVEL ANALYSIS, GDP, GROWTH MODELS, INDUSTRIALIZATION, INFLATION, INFLATION RATES, INTEREST RATES, INVENTORIES, JOB CREATION, JOB DESTRUCTION, JOB FLOWS, JOB LOSSES, JOBS, LABOR DEMAND, LABOR MARKET, LABOR MARKET OUTCOMES, LABOR MARKET REGULATION, LABOR MARKET REGULATIONS, LABOR MARKETS, LABOR REGULATION, LABOR REGULATIONS, LIQUIDITY, LOAN, MACROECONOMIC MODELS, MACROECONOMICS, MANUFACTURERS, MANUFACTURING ESTABLISHMENTS, MARKET FAILURES, MINIMUM WAGE, MINIMUM WAGES, NET EMPLOYMENT, OUTPUTS, PREVIOUS SECTION, PREVIOUS WORK, PRIVATE SECTOR, PRIVILEGED STATUS, PRODUCTION FUNCTIONS, PRODUCTIVE FIRMS, PRODUCTIVITY, PRODUCTIVITY DECOMPOSITIONS, PRODUCTIVITY DIFFERENTIAL, PRODUCTIVITY GAP, PRODUCTIVITY GROWTH, PROFITABILITY, RESOURCE ALLOCATION, SHAREHOLDERS, SMALL FIRMS, SOCIAL COSTS, TOTAL OUTPUT, UNSKILLED WORKERS, USE VALUE, VALUE ADDED, WAGE LEVELS, WORKER,
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 https://hdl.handle.net/10986/3635
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