Exit–entry, productivity growth and structural change in response to changes in macroeconomic policy: evidence from Argentina

Abstract

This article highlights the macro-to-micro interactions in Argentine industrial sector by examining the response of different manufacturing industries to changes in macroeconomic policies in the early 2000s. It is argued that as a result of the macroeconomic policy changes like the abandonment of currency board regime, i.e., the dollarization of the economy, the structure of industry underwent changes and so did the labour productivity and the competitive capability of different industries. Our results show that a combination of a higher real exchange rate and the expansion of domestic markets coexisted with an increase in the net entry rate in manufacturing activities in 2003–2006, compensating for the high exit rate that prevailed between 1999 and 2002. Above average productivity gains were reported in low and medium tech industries. On the contrary (medium) high tech industries – which were much behind international productivity standards – failed to invest in product and process innovations and could not face the challenge of foreign competition. Our approach throughout the monograph is ‘appreciative’ and descriptive, rather than formal and econometric. We still find considerable richness in studying development processes as from this perspective, much in the ‘pin factory’ tradition.