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Manufacturing Firms in Developing Countries: How Well do they do and Why (2000)
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| Venue: | Journal of Economic Literature |
| Citations: | 392 - 9 self |
BibTeX
@ARTICLE{Tybout00manufacturingfirms,
author = {James Tybout},
title = {Manufacturing Firms in Developing Countries: How Well do they do and Why},
journal = {Journal of Economic Literature},
year = {2000},
volume = {38},
pages = {11--44}
}
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Abstract
The manufacturing sectors of less developed countries (LDCs) have traditionally been relatively protected. They have also been subject to heavy regulation, much of which is biased in favor of large enterprises. Accordingly, it is often argued that manufacturers in these countries perform poorly in several respects: (1) markets tolerate inefficient firms, so cross-firm productivity dispersion is high; (2) small groups of entrenched oligopolists exploit monopoly power in product markets; and (3) many small firms are unable or unwilling to grow, so important scale economies go unexploited. In this paper I assess each of these conjectures, drawing on plant and firm-level studies of LDC manufacturers. I find none to be systematically supported. Turnover is substantial, unexploited scale economies are modest, and convincing demonstrations of monopoly rents are generally lacking. Nonetheless I find some evidence that protection increases firms ’ price-cost margins and reduces average efficiency levels at the margin. Finally, although the econometric evidence on technology diffusion in LDCs is limited, it does suggest that protecting “learning ” industries is unlikely to foster productivity growth. All of this suggests that the general trend toward trade liberalization has yielded larger benefits that the traditional gains from trade.
Keyphrases
heavy regulation protection increase firm price-cost margin cross-firm productivity dispersion traditional gain productivity growth developed country monopoly power general trend several respect monopoly rent unexploited scale economy manufacturing sector technology diffusion firm-level study entrenched oligopolists econometric evidence product market large enterprise small group trade liberalization ldc manufacturer inefficient firm reduces average efficiency level many small firm important scale economy
