The University of Southampton
University of Southampton Institutional Repository

The effects of structural reforms on productivity and profitability enhancing reallocation: evidence from Colombia

Eslava, Marcela, Haltiwanger, John, Kugler, Adriana and Kugler, Maurice (2004) The effects of structural reforms on productivity and profitability enhancing reallocation: evidence from Colombia Journal of Development Economics, 75, (2), pp. 333-371. (doi:10.1016/j.jdeveco.2004.06.002).

Record type: Article

Abstract

Estimates for the U.S. suggest that at least in some sectors productivity enhancing reallocation is the dominant factor in accounting for productivity growth. An open question, particularly relevant for developing countries, is whether reallocation is always productivity enhancing. It may be that imperfect competition or other barriers to competitive environments imply that the reallocation process is not fully efficient in these countries. Using a unique plant-level longitudinal dataset for Colombia for the period 1982–1998, we explore these issues by examining the interaction between market allocation, and productivity and profitability. Moreover, given the important trade, labor and financial market reforms in Colombia during the early 1990s, we explore whether and how the contribution of reallocation changed over the period of study. Our data permit measurement of plant-level quantities and prices. Taking advantage of the rich structure of our price data, we propose a sequential methodology to estimate productivity and demand shocks at the plant level. First, we estimate total factor productivity (TFP) with plant-level physical output data, where we use downstream demand to instrument inputs. We then turn to estimating demand shocks and mark-ups with plant-level price data, using TFP to instrument for output in the inverse-demand equation. We examine the evolution of the distributions of TFP and demand shocks in response to the market reforms in the 1990s. We find that market reforms are associated with rising overall productivity that is largely driven by reallocation away from low- and towards high-productivity businesses. In addition, we find that the allocation of activity across businesses is less driven by demand factors after reforms. We find that the increase in aggregate productivity post-reform is entirely accounted for by the improved allocation of activity.

Full text not available from this repository.

More information

Published date: 2004
Keywords: structural reforms, reallocation, productivity growth, demand shock vs. technical efficiciency decomposition

Identifiers

Local EPrints ID: 34587
URI: http://eprints.soton.ac.uk/id/eprint/34587
ISSN: 0304-3878
PURE UUID: 65204646-e6d3-4c69-9418-2fdfeec4723e

Catalogue record

Date deposited: 15 May 2006
Last modified: 17 Jul 2017 15:50

Export record

Altmetrics

Contributors

Author: Marcela Eslava
Author: John Haltiwanger
Author: Adriana Kugler
Author: Maurice Kugler

University divisions

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of http://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×