OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

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Entry, Exit, and Aggregate Productivity Growth

Micro Evidence on Korean Manufacturing

Using plant level panel data on Korean manufacturing during the 1990-98 period, this study tries to assess the role of entry and exit in enhancing aggregate productivity, both qualitatively and quantitatively. The main findings of this study are summarised as follows. First, plant entry and exit rates in Korean manufacturing seem quite high: they are higher than in both the United States and several developing countries for which comparable studies exist. Second, in line with existing studies on other countries, plant turnover reflects underlying productivity differentials in Korean manufacturing, with the “shadow of death” effect as well as selection and learning effects all present. Third, plant entry and exit account for as much as 45 and 65 per cent in manufacturing productivity growth during cyclical upturn and downturn, respectively. This study also shows that plant birth and death are mainly a process of resource reallocation from plants with relatively low and declining ...


Keywords: entry and exit, productivity growth, Korean manufacturing
JEL: D24: Microeconomics / Production and Organizations / Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity; O40: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Economic Growth and Aggregate Productivity: General; D21: Microeconomics / Production and Organizations / Firm Behavior: Theory; E32: Macroeconomics and Monetary Economics / Prices, Business Fluctuations, and Cycles / Business Fluctuations; Cycles; G38: Financial Economics / Corporate Finance and Governance / Corporate Finance and Governance: Government Policy and Regulation; L60: Industrial Organization / Industry Studies: Manufacturing / Industry Studies: Manufacturing: General
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