As the Market Churns: Estimates of Firm Exit and Job Loss Using the World Bank's Enterprise Surveys
40 Pages Posted: 20 Apr 2016
Date Written: March 23, 2015
This paper uses a unique data set of panel firms from the World Bank's Enterprise Surveys in 47 economies, to provide estimates of the patterns of firm exit, and analyzes various firm characteristics and conditions under which firms leave the market. Firms' labor productivity and age are robustly associated with a lower likelihood of exit, consistent with conceptions of creative destruction and findings elsewhere in the literature. These findings are robust across several specifications. However, the effects are mitigated by other factors, such as use of bank financing and the presence of limited liability. Although firm size does appear to matter, its effect is lessened after accounting for labor productivity. The paper also provides basic estimates of job loss attributable to firm exit, estimating that on average 3 to 4 percent of private sector employment is lost per annum due to firm exit. Because of the challenges of data collection, the analysis relies on a necessarily conservative definition of exit and provides a framework for future work on utilizing such periodic survey panels to estimate the relative patterns of firm attrition and the associated job loss.
Keywords: Business in Development
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