Thompson, FraserHallward-Driemeier, Mary2012-03-192012-03-192009-10-01https://hdl.handle.net/10986/4277How important is firm turnover to national productivity growth? The literature points to the contribution of creative destruction being strongest in more developed countries or where market institutions are strongest. This paper looks at the case of Morocco, spanning 16 years, during which reform initiatives aiming to strengthen market forces were introduced. The paper argues that it is important to take into account i) the timing of how decompositions are structured (capturing the effects of high growth among young firms as part of the benefit of increased entry) and ii) the additional indirect impacts of firm dynamics on agglomeration externalities and competition. The paper shows there are striking differences in the productivity paths of entering and exiting firms compared with incumbents, and that restricting the time horizon of productivity decompositions to the actual year of entry or exit underestimates the productivity effects of turnover. Although it has been hypothesized that conducting decompositions over longer horizons would increase the positive contribution of net turnover, this is not the case in Morocco as losses from exiting firms rise too. Nor has the net contribution of turnover increased with market reforms; if anything, the contribution has declined over time. But the allocation of resources has improved. Both technical and allocative efficiency have risen since the mid-1990s. The paper also shows that firm turnover affects productivity through additional channels. It is closely correlated with measures of agglomeration that are associated with higher rates of exit among unproductive firms, and turnover itself is positively associated with subsequent productivity growth of incumbents.CC BY 3.0 IGOACCOUNTINGAGGLOMERATION EFFECTSAGGREGATE FLUCTUATIONSAGGREGATE PERFORMANCEAGGREGATE PRODUCTIVITYAGGREGATE PRODUCTIVITY GROWTHALLOCATIVE EFFICIENCYAVERAGE PRODUCTIVITYBARRIERS TO ENTRYBASE YEARBOOK VALUEBUSINESS CLIMATEBUSINESS CYCLEBUSINESS REGULATIONBUSINESSESCASUAL WORKERCASUAL WORKERSCOMMERCECOMPARATIVE ANALYSISCOMPETITIVE ADVANTAGECOMPETITIVE PRESSURESCOMPETITIVENESSCOMPETITORSCORPORATIONCREATIVE DESTRUCTIONDEFLATORSDEVELOPMENT ECONOMICSDRIVERSECONOMETRICSECONOMIC ACTIVITYECONOMIC CONDITIONSECONOMIC DEVELOPMENTECONOMIC OUTLOOKEMPLOYMENTENTREPRENEURSHIPENTRY RATEEQUIPMENTEXPORT LED GROWTHEXPORTSEXTERNALITIESFIRM DYNAMICSFIRM ENTRYFIRM EXITFIRM LEVELFIRM PERFORMANCEFIRM PRODUCTIVITYFIRM SURVEYFIRM TURNOVERFOREIGN OWNERSHIPFREE PRESSFUNCTIONAL FORMSGDPGDP DEFLATORGROWTH RATEINDUSTRIAL STRUCTUREINDUSTRY CHARACTERISTICSINDUSTRY PRODUCTIVITYINEFFICIENCYINTERNATIONAL MARKETSINTERNATIONALIZATIONJOB CREATIONJOB DESTRUCTIONJOB LOSSLABOR MARKETSLABOR PRODUCTIVITYLABOURLABOUR PRODUCTIVITYLARGE ENTERPRISESLESS DEVELOPED COUNTRIESLOCAL INDUSTRYLONG-RUN EFFECTSMACROECONOMIC ANALYSISMACROECONOMIC PERFORMANCEMACROECONOMIC POLICIESMACROECONOMICSMANUFACTURERSMANUFACTURING ENTERPRISESMANUFACTURING ESTABLISHMENTSMARKET SHAREMARKET SHARESMISSING VALUESMOTIVATIONNET ENTRY COMPONENTNET ENTRY EFFECTNET JOB CREATIONOUTPUTSPREVIOUS STUDIESPRIVATE SECTORPRODUCTION FUNCTIONPRODUCTIVE FIRMSPRODUCTIVITYPRODUCTIVITY COMPONENTSPRODUCTIVITY DECOMPOSITIONPRODUCTIVITY DECOMPOSITIONSPRODUCTIVITY DISTRIBUTIONPRODUCTIVITY EFFECTSPRODUCTIVITY GROWTHPRODUCTIVITY IMPROVEMENTSPRODUCTIVITY INCREASESPRODUCTIVITY LEVELSPRODUCTIVITY REGRESSIONPRODUCTIVITY REGRESSIONSPROPERTY RIGHTSPROPRIETORSHIPPUBLIC ENTERPRISESRECESSIONARY PERIODSREGRESSION ANALYSISREGULATORY REFORMSRESULTRESULTSSEESSMALL MANUFACTURINGSTATE OWNED COMPANIESSTRUCTURAL CHANGETELECOMMUNICATIONSTEMPORARY WORKERSTIME PERIODTIME PERIODSTOTAL EMPLOYMENTTOTAL FACTOR PRODUCTIVITYTOTAL WORKERSTRADE LIBERALIZATIONUNDERESTIMATESVALUE ADDEDWAGESWEBWORKERWorld Bank10.1596/1813-9450-5085