NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Firm-level Evidence on Productivity Differentials, Turnover, and Exports in Taiwanese Manufacturing

Bee Yan Aw, Xiaomin Chen, Mark J. Roberts

NBER Working Paper No. 6235
Issued in October 1997
NBER Program(s):   PR

The manufacturing sector in Taiwan has a market structure composed of large numbers of small firms, a focus on less capital-intensive industries, and a dense network of firms specializing in subcontracting and trading services. It has been argued that these features lower the start-up costs of new manufacturing firms. Recent theoretical models of market evolution show that low sunk entry and exit costs act to speed firm turnover by facilitating entry and increasing the pressure on inefficient firms to exit. As a result, low cost entry and exit may help improve aggregate productivity by allowing for the rapid transfer of resources from less to more efficient producers within an industry. Using comprehensive firm-level panel data from the Taiwanese Census of Manufactures for 1981, 1986, and 1991, we measure differences in total factor productivity among entering, exiting, and continuing firms, and quantify the contribution of firm turnover to industry productivity improvements. We find notable differences in productivity across manufacturing firms that are reflected in turnover patterns in both the domestic and export market. Cohorts of new firms have lower average productivity than incumbents but are also a heterogeneous group. The more productive members of the group survive and in many cases their productivity converges to the productivity level of incumbents. Exiting firms are less productive than survivors. Exporters, including firms that recently left the export market, are more productive than nonexporters. These patterns are consistent with the view that both the domestic and export market sort out high productivity from low productivity firms and that the export market is a tougher screen.

download in pdf format
   (1545 K)

email paper

This paper is available as PDF (1545 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w6235

Published: Journal of Development Economics, Vol. 66, October 2001, pp. 51-86.

Users who downloaded this paper also downloaded these:
Aw-Roberts, Chung, and Roberts w6558 Productivity and the Decision to Export: Micro Evidence from Taiwan and South Korea
Saez w8037 The Optimal Treatment of Tax Expenditures
Foster, Haltiwanger, and Krizan Aggregate Productivity Growth. Lessons from Microeconomic Evidence
Kotlikoff w5776 Simulating the Privatization of Social Security in General Equilibrium
Aw-Roberts, Chung, and Roberts w8766 Productivity, Output, and Failure: A Comparison of Taiwanese and Korean Manufacturers
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us