Firm size, labor probability and new firm's exit In manufacturing industries of Iran

Document Type : Research Article



Firm’s exit is of the main indicators that can with two look illustrate the economic situation in every country. On one hand, it can be considered as the ravages in economyand on the other hand, replacement of old firms by new firms is reflection of economic dynamism. In this manner, firm exit can be evaluated by different criteria and life duration is one of the most important of this indicators. However, firm exit occurs under the influence of several factors and productivity is the most important factor that can explain the exit phenomena, especially for the new firms. Nevertheless, emphasis on SMEs as the main policies for job creation as well as exit the bulk of them, this questionthat whatare the impact of firm's size on labour productivity and thus the probability of exit? has been caused, and hence, answer to this question is the main purpose of this article. For this purpose, a new manufacturing firm during 1995 – 1999 periods has been studiedin Iran. Using panel data econometric as well as Cox proportional hazard model, the rsults indicate that labor productivity is affected by firm size and this in turn has had a significant effect on the exit of new firms.