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Do crises catalyze creative destruction ? firm-level evidence from Indonesia, Volume 1
 
Author:Hallward-Driemeier, Mary; Rijkers, Bob; Country:Indonesia;
Date Stored:2011/11/02Document Date:2011/11/01
Document Type:Policy Research Working PaperSubTopics:Economic Theory & Research; Banks & Banking Reform; Microfinance; Labor Policies; Labor Markets
Language:EnglishRegion:East Asia and Pacific
Report Number:WPS5869Collection Title:Policy Research working paper ; no. WPS 5869
Volume No:1  

Summary: Using Indonesian manufacturing census data (1991-2001), this paper rejects the hypothesis that the East Asian crisis unequivocally improved the reallocative process. The correlation between productivity and employment growth did not strengthen and the crisis induced the exit of relatively productive firms. The attenuation of the relationship between productivity and survival was stronger in provinces with comparatively lower reductions in minimum wages, but not due to reduced entry, changing loan conditions, or firms connected to the Suharto regime suffering disproportionately. On the bright side, firms that entered during the crisis were relatively more productive, which helped mitigate the reduction in aggregate productivity.

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