Firm-level evidence on productivity differentials and turnover in Taiwanese manufacturing

Research output: Contribution to journalArticle

166 Citations (Scopus)

Abstract

High rates of firm entry and exit have accompanied the rapid and sustained growth of output in Taiwan's manufacturing sector. A high rate of firm turnover can contribute to industry productivity growth if it reflects a transfer of resources from less efficient to more efficient producers. Using comprehensive firm-level panel data from the Taiwanese Census of Manufactures for 1981, 1986, and 1991, we measure total factor productivity for entering, exiting, and continuing cohorts of firms and quantify the contribution of firm turnover to industry productivity improvements. Across manufacturing firms, we find significant differences in productivity that are reflected in turnover patterns. Cohorts of new firms have lower average productivity than incumbents but are themselves a heterogeneous group. The more productive members of the group, on average, survive and, in many cases, their productivity converges to the productivity level of older incumbents. Exiting firms are less productive than survivors. The productivity differential between entering and exiting firms is an important source of industry-level productivity growth in Taiwanese manufacturing, accounting for as much as one-half of industry improvement in some industries and time periods.

Original languageEnglish (US)
Pages (from-to)51-86
Number of pages36
JournalJournal of Development Economics
Volume66
Issue number1
DOIs
StatePublished - Sep 12 2001

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turnover
manufacturing
productivity
firm
evidence
industry
Industry
Turnover
Manufacturing
Productivity
total factor productivity
manufacturing sector
panel data
census
producer
Taiwan
Group
Incumbents
Productivity growth
Cohort

All Science Journal Classification (ASJC) codes

  • Development
  • Economics and Econometrics

Cite this

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Firm-level evidence on productivity differentials and turnover in Taiwanese manufacturing. / Aw, Bee Yan; Chen, Xiaomin; Roberts, Mark J.

In: Journal of Development Economics, Vol. 66, No. 1, 12.09.2001, p. 51-86.

Research output: Contribution to journalArticle

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