Working Paper BETA #2020-07

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Title : Entry, Exit and Productivity: Evidence from French Manufacturing Firms

Author(s) : Enrico De Monte

Abstract : This paper analyzes productivity dynamics based on French firm-level data covering nine key 2-digit industries for the period 1994 - 2016. I estimate firm-level productivity through the estimation of a translog production function and investigate the following main aspects: (i) aggregate productivity change with firm entry and exit by applying the Dynamic OlleyPakes Productivity Decomposition (DOPD), (ii) firms’ ability to improve productivity and productivity persistence, and (iii) productivity differences between different firm groups such as survivors, entrants and exitors as well as small, medium and big firms by applying the concept of stochastical dominance. My results show that aggregate productivity has increased for most the considered 2-digit industries and that in many cases surviving firms’ have contributed significantly to these positive improvements. Entering firms contribute in many cases positively to aggregate productivity while the contribution of exitors shows varying signs. Furthermore, I find that firms’ reveal a high degree of productivity persistence. Analysing productivity difference between firm groups the results suggest that the productivity distribution of surviving firms stochastically dominates the distribution of entering and exiting firms. Surprisingly, the results reveal that big firms do not stochastically dominate the productivity distribution of small firms.

Key-words : production function estimation, productivity decomposition, technological change, productivity differences, firm entry and exit.

JEL Classification : C13; C14; D24; D30; L60; O47