Productivity, output, and failure: a comparison of taiwanese and korean manufacturers

We use micro panel data for producers in seven two-digit manufacturing industries in South Korea and Taiwan and identify a number of systematic differences in industry structure between the countries. Our empirical findings indicate Taiwanese industries are characterised by less concentrated market structure, more producer turnover, smaller within-industry productivity dispersion across producers, a smaller percentage of plants operating at low productivity levels, and smaller productivity differentials between surviving and failing producers. These patterns are consistent with strong competitive pressures in Taiwan that lead to market selection based on productivity differences. The patterns in Korea are consistent with the presence of some impediments to exit or entry that insulate inefficient producers from market pressures. Copyright 2003 Royal Economic Society.