Do Crises Catalyze Creative Destruction? Firm-level Evidence from Indonesia

Mary Hallward-Driemeier and Bob Rijkers

The Review of Economics and Statistics, 2013, vol. 95, issue 5, 1788-1810

Abstract: Using Indonesian manufacturing census data (1991–2001), this paper rejects the hypothesis that the East Asian crisis unequivocally improved the reallocative process. The correlation between productivity and employment growth did not strengthen, and the crisis induced the exit of relatively productive firms. The attenuation of the relationship between productivity and survival was stronger in provinces with comparatively lower reductions in minimum wages, but not due to reduced entry, changing loan conditions, or firms connected to the Suharto regime suffering disproportionately. On the bright side, firms that entered during the crisis were relatively more productive, which helped mitigate the reduction in aggregate productivity. © 2013 World Bank

Keywords: financial crisis; creative destruction; firm survival; productivity decompositions; capital market imperfections (search for similar items in EconPapers)
JEL-codes: D22 G01 J21 O47 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (54)

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Working Paper: Do crises catalyze creative destruction ? firm-level evidence from Indonesia (2011)
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