ENTRY-EXIT, LEARNING, AND PRODUCTIVITY CHANGE - EVIDENCE FROM CHILE

Do competitive pressures really force inefficient producers to shut down? Do entrants typically increase or worsen industry-wide efficiency? Is there evidence of systematic learning processes, and if yes, do these processes differ across plant cohorts? How do plant turnover effects combine to shape rates of overall industrial productivity growth? This paper applies the recent econometric techniques to address these largely unexplored questions. The analysis is based on the Chilean plant-level panel data covering eight post-reform adjustment years. Plant-specific time-variant technical efficiency indices are constructed for surviving, exiting, and entering plant cohorts, respectively. These are then used to compare productivity growth rates across plant-cohorts, and to examine the net effect of plant turnover and learning patterns on manufacturing-wide productivity growth.