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The effects of structural reforms on productivity and profitabality enhancing reallocation: evidence from Colombia

Marcela Eslava (), John Haltiwanger, Adriana Kugler and Maurice Kugler ()

Discussion Paper Series In Economics And Econometrics from University of Southampton, Economics Division, School of Social Sciences

Abstract: Estimates for the U.S. suggest that in some sectors productivity enhancing reallocation is the dominant factor in accounting for productivity growth. An open question is whether reallocation is always productivity enhancing. Specifically, in developing countries, market concentration, or barriers to competition, may imply that the reallocation process is not fully efficient. Using a unique plant-level longitudinal dataset for Colombia for the period 1982-1998, we use plant-level quantities and prices to implement a novel 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. Market reforms, introduced in the early 1990's, are associated with rising overall productivity that is largely driven by reallocation away from low- and towards high-productivity businesses. Our evidence also points to allocation of activity across businesses being less driven by demand factors after reforms. Keywords; productivity growth, structural reforms, reallocation, profitability, entry and exit Also in: Journal of Development Economics, 75, (2), 333-371. (doi:10.1016/j.jdeveco.2004.06.002)

Date: 2004-01-01
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Journal Article: The effects of structural reforms on productivity and profitability enhancing reallocation: evidence from Colombia (2004) Downloads
Working Paper: The Effects of Structural Reforms on Productivity and Profitability Enhancing Reallocation: Evidence from Colombia (2004) Downloads
Working Paper: The Effects of Structural Reforms on Productivity- and Profitability-Enhancing Reallocation: Evidence from Colombia (2004) Downloads
Working Paper: The Effect of Structural Reforms on Productivity and Profitability Enhancing Reallocation: Evidence from Colombia (2004) Downloads
Working Paper: The effects of structural reforms on productivity and profitability enhancing reallocation: Evidence from Colombia (2004) Downloads
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