Young businesses, entrepreneurship, and the dynamics of employment and output in Colombia's manufacturing industry

Available from: 
October 2013
Paper author(s): 
Marcela Eslava (Universidad de Los Andes)
John Haltiwanger (University of Maryland)
Microeconomics - Competition - Productivity

This paper contributes to understanding the role of entrepreneurship in productivity and job growth with an analysis of manufacturing startups and their expansion patterns, relative to those of established businesses, in a developing economy: Colombia. Many of the obstacles to efficient entry into the market and to efficient growth are most pronounced in developing countries, and many of the questions about fostering entrepreneurship are most relevant for these countries. We characterize a plant’s performance over its life cycle, and its contribution to overall growth. We also look at cross age-size patterns. Our main findings are: 1) The average young establishment grows much faster and is more productive than the typical old one, even abstracting from the contribution of entry; 3) In any age category growth rates are positively correlated with plant size; 4) The probability of growing from SME size to being a large establishment over five-year periods is much larger for young establishments than for older ones. 5) Despite smaller establishments growing at a slower pace within an age category, young small establishments also explain the bulk of employment growth over our sample period: cohorts born before 1980 have contracted substantially by 2009, while employment in younger cohorts grows.


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Research section: 
Lacea 2013 annual meeting
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