Financial Crisis and Productivity Evolution: Evidence from Indonesia

World Economy, Forthcoming

29 Pages Posted: 3 Mar 2014

See all articles by Sharon Poczter

Sharon Poczter

Cornell University

Paul J. Gertler

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Alexander D. Rothenberg

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: Septemer 2, 2011

Abstract

We examine how the productivity of different industries changes over the course of a financial crisis by exploiting cross firm, within industry differences in productivity resulting from the Asian financial crisis of 1997. We show that the crisis coincided with dramatic changes in productivity patterns within the manufacturing sector and that many of these changes were sustained in the long run. In particular, an increasing number of industries experienced decreases in average firm productivity during the crisis that continued through the post-crisis period. Further, we find that productivity recovery in the post-crisis period is driven not by increases in the productivity of existing firms, but rather by the entry of new firms. Finally, we find differences in productivity responses to the financial crisis between different types of firms. While the impact of exporters on productivity evolution remains constant over the crisis, we find that the productivity of domestically owned firms is far more sensitive to changes in the economic environment than foreign owned firms. Further, foreign exporters were the only set of firms that avoided decreases in productivity during the crisis, suggesting that only access to both alternate forms of capital and international markets can help to smooth investment and maintain productivity growth over a financial crisis.

Keywords: emerging markets; financial crisis; productivity evolution

JEL Classification: D24, O14

Suggested Citation

Poczter, Sharon and Gertler, Paul J. and Rothenberg, Alexander D., Financial Crisis and Productivity Evolution: Evidence from Indonesia (Septemer 2, 2011). World Economy, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2403512

Sharon Poczter (Contact Author)

Cornell University ( email )

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United States

Paul J. Gertler

University of California, Berkeley - Haas School of Business ( email )

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Berkeley, CA 94720
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National Bureau of Economic Research (NBER)

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Alexander D. Rothenberg

Board of Governors of the Federal Reserve System ( email )

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