Productivity and firm exit during the COVID-19 crisis: cross-country evidence

Silvia Muzi, Filip Jolevski, Kohei Ueda and Domenico Viganola
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Kohei Ueda: World Bank Group
Domenico Viganola: World Bank Group

Small Business Economics, 2023, vol. 60, issue 4, No 19, 1719-1760

Abstract: Abstract This paper examines whether the economic crisis induced by the COVID-19 pandemic exhibits a Schumpeterian “cleansing” of less productive firms. Using firm-level data collected for 34 economies up to 18 months into the crisis, the study finds that less productive firms have a higher probability of permanently closing during the crisis, suggesting that the process of cleansing out unproductive activities is occurring. The paper also uncovers strong and negative relationships of firm exit with digital presence and with innovation. These relationships are driven by small firms. The study further finds that a burdensome business environment increases the probability of firm exit, also driven by small firms, and that a negative relationship exists between firm exit and age. Finally, evidence shows that the cleansing process is disrupted in countries which have introduced policies imposing a moratorium on insolvency procedures.

Keywords: Firm survival; Productivity; Business environment; Innovation; Digitalization COVID-19 (search for similar items in EconPapers)
JEL-codes: D24 G33 L22 L25 O14 O30 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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DOI: 10.1007/s11187-022-00675-w

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