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Financial Crisis and Productivity Evolution: Evidence from Indonesia

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  • Sharon Poczter
  • Paul Gertler
  • Alexander D. Rothenberg

Abstract

type="main" xml:id="twec12086-abs-0001"> 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 Asian 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.

Suggested Citation

  • Sharon Poczter & Paul Gertler & Alexander D. Rothenberg, 2014. "Financial Crisis and Productivity Evolution: Evidence from Indonesia," The World Economy, Wiley Blackwell, vol. 37(5), pages 705-731, May.
    • Handle: RePEc:bla:worlde:v:37:y:2014:i:5:p:705-731
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    File URL: http://hdl.handle.net/10.1111/twec.2014.37.issue-5
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    Cited by:

    1. Gupta, Krisna, 2019. "Modeling the Importance of Financial Liberalization to Indonesia's Economic Growth," Conference papers 333064, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Ryota Nakatani, 2017. "The Effects of Productivity Shocks, Financial Shocks, and Monetary Policy on Exchange Rates: An Application of the Currency Crisis Model and Implications for Emerging Market Crises," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(11), pages 2545-2561, November.
    3. Aloysius Gunadi Brata & Henri L. F. De Groot & Wouter Zant, 2018. "Shaking up the Firm Survival: Evidence from Yogyakarta (Indonesia)," Economies, MDPI, vol. 6(2), pages 1-14, April.
    4. Kapelko, Magdalena & Oude Lansink, Alfons & Stefanou, Spiro, 2014. "The Impact of the 2008 Economic Crisis on Dynamic Productivity Growth of the Spanish Food Manufacturing Industry. An Impulse Response Analysis," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182769, European Association of Agricultural Economists.

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