Relation entry, exit and productivity: an overview of recent theoretical and empirical literature

Viktoria Kocsis, Victoria Shestalova, Henry van der Wiel, Nick Zubanov, Ruslan Lukach and Bert Minne

No 180, CPB Document from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: This document provides a review of recent theoretical and empirical literature on the relationship between entry, exit and productivity. Decomposition methods show that entry and exit considerably contribute to productivity growth, but are unable to shed any light on the ultimate sources of productivity growth. However, the theories discussed do provide options for effective policy instruments. We argue that productivity or welfare should be the aim of policy and not the number of entrants, the intensity of competition or the amount of innovation expenditures.Taking a welfare approach, we address market failures with respect to entry. The most eminent market failure is market power of dominant incumbents. Lowering institutional entry barriers economy-wide is a promising policy option for further consideration.Whether such a policy measure actually improves social welfare depends also on the extent of other failures. Therefore, an ex ante cost-benefit analysis needs to precede intervention.

JEL-codes: B41 O30 O40 (search for similar items in EconPapers)
Date: 2009-03
New Economics Papers: this item is included in nep-com, nep-eff, nep-ent, nep-mic and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:cpb:docmnt:180

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