Financial Crisis and Productivity Evolution: Evidence from Indonesia

Sharon Poczter, Paul Gertler, Alexander D. Rothenberg

Research output: Contribution to journalArticle

6 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)705-731
Number of pages27
JournalWorld Economy
Volume37
Issue number5
DOIs
StatePublished - May 2014
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

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