PRODUCER TURNOVER AND PRODUCTIVITY GROWTH IN DEVELOPING-COUNTRIES

The reallocation of resources, either across sectors or across produce rs within a sector, can serve as a potential source of productivity gr owth. New research findings exploit comprehensive microeconomic data o n the manufacturing sectors of Chile, Colombia, and Morocco to documen t resource shifts as producers enter, expand contract, and exit operat ion. The micro-level adjustment is substantial; between 25 and 30 perc ent of the total number of manufacturing jobs turn over each year. In the short run, the productivity effects of this turnover are modest be cause the new plants that come on line are only slightly more producti ve than the ones they replace-and both are typically small. In the lon ger term, however, the turnover generates more substantial increases i n productivity because the new firms that survive record substantial p roductivity gains in their early years. Moreover, firms that exit are typically on a downward productivity spiral and would probably have dr agged down sectoral efficiency farther if they had continued in operat ion.