EVALUATING THE FIRMS TURNOVER CONTRIBUTION TO THE SECTOR EFFICIENCY GROWTH: DO FIRMS SELECTION POLICIES MATTER?
EVALUATING THE FIRMS TURNOVER CONTRIBUTION TO THE SECTOR EFFICIENCY GROWTH: DO FIRMS SELECTION POLICIES MATTER?

Summary/Abstract: This paper offers a dynamic model of monopolistic competition which combines both the adoption and the industry evolution theories, by formalizing the decisions of Adoption, Learning, Entry and Exit of firms. The theoretical framework allows to evaluate simultaneously the contribution to the sector efficiency growth of the intra and inter-firms determinants. The Intra-firm determinant is defined by the effort of learning and adoption of innovations, while the inter-firms determinant relates to firms’ entry and exit (Turnover). The results show that firms’ turnover has no significant contribution to the sector efficiency growth and thus involve policies of selection of less efficient firms recommended especially by the World Bank for developing countries. We show that efficiency growth is principally generated by the intra-firm determinant and recommend policies enhancing firms’ learning and innovation activities.

• Details
• Contents