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Productivity and Firm Exit during the COVID-19 Crisis: Cross-Country Evidence

Silvia Muzi, Filip Jolevski, Kohei Ueda and Domenico Viganola

No 9671, Policy Research Working Paper Series from The World Bank

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 for 31 economies, 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 arrangements may be at work. The paper also uncovers a strong and negative relationship between firm exit and innovation and digital presence, especially for small firms, confirming the relevance of the ability to adapt to market conditions as a determinant of firm survival. Finally, the study finds evidence of a negative relationship between firm exit and a burdensome business environment, as well as between firm exit and age.

Keywords: Labor Markets; Financial Sector Policy; Business Environment; Food&Beverage Industry; Plastics&Rubber Industry; Textiles; Apparel&Leather Industry; Pulp&Paper Industry; Common Carriers Industry; Construction Industry; Business Cycles and Stabilization Policies; General Manufacturing (search for similar items in EconPapers)
Date: 2021-05-24
New Economics Papers: this item is included in nep-bec, nep-eff and nep-sbm
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Journal Article: Productivity and firm exit during the COVID-19 crisis: cross-country evidence (2023) Downloads
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