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Financial Crisis and Productivity Evolution: Evidence from Indonesia
Author(s) -
Poczter Sharon,
Gertler Paul,
Rothenberg Alexander D.
Publication year - 2014
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12086
Subject(s) - productivity , financial crisis , economics , monetary economics , investment (military) , capital (architecture) , business , finance , macroeconomics , history , archaeology , politics , political science , law
We examine how the productivity of different industries changes over the course of a financial crisis by exploiting cross‐firm, within‐industry differences in productivity resulting from the A sian financial crisis of 1997. We show that the crisis coincided with dramatic changes in productivity and that many of these changes were sustained in the long run. In particular, an increasing number of industries experienced decreases in average firm productivity during the crisis and did not recover. Further, we find that changes in industrial productivity in the recovery period are driven not by increases in the productivity of existing firms, but rather by the entry of new firms and changes to the reallocation of market share. Finally, we find that foreign exporters' productivity was the least impacted by the crisis, suggesting that only access to alternate forms of both capital and international markets can help to smooth investment and maintain productivity over a financial crisis.