Competition, Firm Turnover and Productivity Growth
John R. Baldwin
Statistics Canada - Microeconomic Analysis Division
Government of Canada - Micro-Economic Analysis Division
September 25, 2006
This paper investigates the extent to which productivity growth is the result of firm turnover as output is shifted from one firm to another, driven by the competitive process. Turnover occurs as some firms gain market share and others lose it. Some of the resulting turnover is due to entry and exit. Another part arises from growth and decline in incumbent continuing firms. This paper proposes a method for measuring the impact of firm turnover on productivity growth and shows that this impact is far more important than many previous empirical studies have concluded. It argues that firm turnover associated with competition is the main source of aggregate labour productivity growth in Canadian manufacturing industries.
Number of Pages in PDF File: 38
Keywords: competition, firm turnover, productivity growth
JEL Classification: D41, F12, O47, J24, D24working papers series
Date posted: April 1, 2009
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