Entry, Exit, and Productivity in Tunisian Manufacturing Industries

Almost all countries in the MENA region entered the new millennium with large unemployment rates. In this context, decision makers emphasize the role of efficient markets which could lead to higher firm creation rates and thereby, to lower unemployment rates. Aside to direct employment effects, high firm creation rates are supposed to have a positive impact on the technical and organizational change of economies because new firms are on average, better equipped with the latest technical and organizational knowledge. Indeed, in addition to expanding the range of products, entry can first create more competition, lower prices for consumers, and may lead to better technology adoption. Changes in the status of existing firms from informal to formal may also have important effects on GDP growth. This chapter presents some stylized facts about firms' entry and exit and economic performance in Tunisian manufacturing industries. The first section deals with regulations, upgrading program and business environment in Tunisia. Data used to analyze patterns of entry and exit in Tunisian manufacturing industries and their impact on firm’s performance are presented in Sect. 4.2. The determinants of entry and exit process are discussed in Sect. 4.3. This section focuses on the implications that the interdependence between aggregate entry and exit has for the analysis of manufacturing industry dynamics in Tunisia. The purpose of the forth section is to investigate whether entry and exit of firms affect performance and labor productivity.