Financial Crisis and Productivity Evolution: Evidence from Indonesia

27 Pages Posted: 8 May 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: May 2014

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 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 and did not recover. Further, we find that changes in industrial productivity in the recovery period are driven not by increases in the productivity of existing firms, but rather by the entry of new firms and changes to the reallocation of market share. Finally, we find that foreign exporters' productivity was the least impacted by the crisis, suggesting that only access to alternate forms of both capital and international markets can help to smooth investment and maintain productivity over a financial crisis.

Suggested Citation

Poczter, Sharon and Gertler, Paul J. and Rothenberg, Alexander D., Financial Crisis and Productivity Evolution: Evidence from Indonesia (May 2014). The World Economy, Vol. 37, Issue 5, pp. 705-731, 2014, Available at SSRN: https://ssrn.com/abstract=2434320 or http://dx.doi.org/10.1111/twec.12086

Sharon Poczter

Cornell University ( email )

Ithaca, NY 14853
United States

Paul J. Gertler

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

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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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United States

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