Good turnover and bad turnover: Barriers to business and productivity

Abstract

Entrepreneurship, as reflected in industry turnover rates, is a central force behind output and productivity growth. However, cross country comparisons suggest that turnover rates are remarkably independent of barriers to business: Singapore, one of the most entry-friendly countries in the world, has the same industry turnover rate as Uzbekistan, a country where entry is considerably more difficult. In this paper, I suggest the solution to this apparent puzzle lies in the effect of survival barriers, which, like entry barriers, are higher in Uzbekistan than in Singapore. In other words, with similar turnover rates, Singapore is characterized by “good” turnover, whereas Uzbekistan is characterized by “bad” turnover.