Entry and exit from manufacturing industries: symmetry, turbulence and simultaneity - some empirical evidence from Greek manufacturing industries, 1982-1988

Georgios Fotopoulos and Nigel Spence

Applied Economics, 1998, vol. 30, issue 2, 245-262

Abstract: The interdependence between entry and exit of firms into manufacturing industries is the focus of this research. When both entry and exit equations are estimated separately the results support the existence of strong symmetry in their determinants. When, however, entry and exit are estimated within a simultaneous equation framework, the empirical evidence does not offer sufficient grounds to support the notion that entry and exit are simultaneously linked. Instead it seems that they are two contemporaneously related processes which respond in like fashion to the structural characteristics found in particular industries. Their linked response is also extended to factors unaccounted for by the individual entry and exit formulations, and this expresses itself in significant contemporaneous correlation between the entry and exit equation residuals. The change in the identities of firms operating, implied by the positive correlation between entry and exit, may then be attributed to industry turbulent conditions, which in turn appear perhaps to be conditioned in the shorter run by time-invariant inter-industry differences in technological factors and sunk costs.

Date: 1998
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DOI: 10.1080/000368498326047

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