Entry, Exit And Firm Productivity Growth

Many non-state capitals start to penetrate into different industry after the reform of economic system with administrative control releasing and entry barrier declining. On the other hands, non-state-owned enterprises are splitting profits of state enterprises, and the intense competition impels the state enterprises to improve themselves. This article studies the relationship between competition and business productivity. It concludes that TFP are improving with time varying, but TFP in the same year show substantial differences. All are related with the entry and exit of companies. The entry ratio in mature market economy is between 3.2% and 8.2%. While entry ratio in China is 29.8%, which higher than other countries in the world. What’s more, the output value of entry and exit plants is significant in the whole industry. It concludes that TFP of entry plants is significantly higher than TFP of exit plants; TFP of entry plants is significantly higher than TFP of survivals; TFP of survivals is significantly higher than TFP of exit plants. And TFP of a plant can improve with time varying, which is called improvement effects. We conclude that competition have important effects on TFP via decomposition of TFP. In the end, we build different kinds of econometric models to estimate coefficients of competition. It concludes that the coefficient of competition is positive and significant.