PRODUCER TURNOVER AND PRODUCTIVITY GROWTH IN DEVELOPING COUNTRIES

Abstract

The reallocation of productive resources, either across sectors or across producers within a sector, is a potential source of growth. This paper summarizes new research findings on the magnitude and importance of these intra-sectoral resource movements. The research exploits comprehensive micro data sets for the manufacturing sectors of Colombia, Chile, and Morocco and documents the magnitude of resource movements as producers enter, expand, contract, and exit operation. The micro-level adjustment is substantial: on average in each year, between 25 and 30 percent of the number of manufacturing employment positions is added through the opening and expansion of one group of producers and the contraction and exit of another. The short-run productivity effects of this turnover are modest as new producers are only slightly more productive than the ones they replace and both are small. The long-term picture, however, is one of more substantial productivity improvements as a result of this continual within-sector movement of movement of resources from less efficient to more efficient producers. Many developing countries are undergoing rapid structural transformation. They are often

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