 The Effects of Structural Reforms on Productivity- and Profitability-Enhancing Reallocation: Evidence from ColombiaJohn Haltiwanger, Adriana Kugler, Maurice Kugler () and Marcela Eslava No 4569, CEPR Discussion Papers from C.E.P.R. Discussion Papers Abstract: Estimates for the US suggest that at least in some sectors productivity-enhancing reallocation is the dominant factor in accounting for productivity growth. An open question, particularly relevant for developing countries, is whether reallocation is always productivity enhancing. It may be that imperfect competition or other barriers to competitive environments imply that the reallocation process is not fully efficient in these countries. Using a unique plant-level longitudinal dataset for Colombia for the period 1982-98, we explore these issues by examining the interaction between market allocation, and productivity and profitability. Moreover, given the important trade, labour and financial market reforms in Colombia during the early 1990s, we explore whether and how the contribution of reallocation changed over the period of study. Our data permit measurement of plant-level quantities and prices. Taking advantage of the rich structure of our price data, we propose a sequential methodology to estimate productivity and demand shocks at the plant level. First, we estimate total factor productivity (TFP) with plant-level physical output data, where we use downstream demand to instrument inputs. We then turn to estimating demand shocks and mark-ups with plant-level price data, using TFP to instrument for output in the inverse demand equation. We examine the evolution of the distributions of TFP and demand shocks in response to the market reforms in the 1990s. We find that market reforms are associated with rising overall productivity that is largely driven by reallocation away from low- and towards high-productivity businesses. In addition, we find that the allocation of activity across businesses is less driven by demand factors after reforms. We find that the increase in aggregate productivity post-reform is entirely accounted for by the improved allocation of activity. Keywords: Tfp measurement; Productivity and demand decompositions; Structural reforms (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:4569 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX. |
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