Exit in Developing Countries: Economic Reforms and Plant Heterogeneity

A study was conducted to examine the effects of economic reforms on plant exit in developing countries like Chile. The empirical analysis is based on the Annual National Industrial Survey (ENIA) carried out by Chile's National Institute of Statistics (INE) for 1979-2000. The survey covers all Chilean manufacturing plants with ten or more workers. However, a significant percentage of firms in the survey are actually single plants. A lack of external funding combined with low world economic growth rates induced a deep recession in 1982. Given the situation at the time, the government decided to increase tariffs from 10% to 20% in 1983 and to 35% in 1985. Despite some disparity in the evolution and sequencing of different reforms, the Chilean economy experienced a widespread economic liberalization over the period. There was significant change in the mid-1980s due to a tax reform adopted in 1984.