Charting the Course: Total Factor Productivity Trends in Croatia Post-pre-bankruptcy Act
Keywords:
total factor productivity, pre-bankruptcy act, synthetic control method, placebo test, Croatia
Abstract
The synthetic control method (SCM) is a valuable tool for unbiased pre-bankruptcy reform analysis in economic policy evaluations. This study utilizes SCM to assess the impact of the Financial Operations and Pre-Bankruptcy Settlement Act (AFOPBS) on Croatia's total factor productivity (TFP). Control units and weights were meticulously chosen to construct a synthetic control for Croatia, creating a counterfactual scenario for the reform's absence. The policy's impact was quantified by comparing TFP growth post-policy between Croatia and its synthetic control. Placebo tests confirmed the results' significance, and further validation was achieved through panel difference-in-differences analysis (PDID). Our findings show that the pre-bankruptcy reform in late 2012 effectively reduced the gap between Croatia and its synthetic control throughout the post-treatment years. However, it had two short-term adverse impacts and a subsequent recovery-like phase. These effects were statistically significant and confirmed by cross-validation. In conclusion, Croatia's pre-bankruptcy reform significantly influenced TFP volatility, highlighting SCM's effectiveness in evaluating economic policies, especially those crucial for economic growth
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References
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Tamayo, C. (2017). Bankruptcy choice with endogenous financial constraints, Review of Economic
Dynamics, 26, 225-242. DOI: 10.1016/j.red.2017.06.004.
Tomura, Hajime. (2007). Firms Dynamics, Bankruptcy Laws, and Total Factor Productivity, Bank
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Chicago Press, Chicago, and London. DOI: 10.7208/Chicago/9780226666143.001.0001.
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Xia, H., Wu, S. (2021). Effect of the International Tourism Island Policy on Hainan Farmers’
Income and the Urban-rural Income gap: An analysis based on the GPCA and SCM Models. J. Adv. Comput. Intell. Intell. Inform., 25(5), 592–600. DOI: 10.20965/jaciii.2021.p0592.
Yamaguchi, K. (2022). The productivity impact of the government-led bailout of Japan Airlines,
Asian Transport Studies, 8, 1-9. ISSN 2185-5560. DOI: 10.1016/j.eastsj.2022.
Aspects, J. Econ. Lit., 59(2), 391–425. DOI: 10.1257/jel.20191450.
Abadie, A., Gardeazabal, J. (2003). The economic costs of conflict: A case study of the Basque
Country, Am. Econ. Rev., 93, 113–132. DOI: 10.2139/ssrn.293120.
Abadie, A., Diamond, A., Hainmueller, A. J. (2010). Synthetic control methods for
comparative case studies: Estimating the effect of California’s tobacco control program, J.
Am. Stat. Assoc., 105, 493–505. DOI: 10.1198/jasa.2009.ap08746.
Abadie, A., Diamond, A., Hainmueller, J. (2015). Comparative Politics and the Synthetic
Control Method. Am. J. Pol. Sci., 59, 495–510. DOI: 10.2139/ssrn.1950298.
Acemoglu, D., Guerrieri, V. (2008). Capital Deepening and Non-Balanced Economic Growth,
Journal of Political Economy, 116, 467–498. DOI: 10.1086/589523.
Albalate, D., Bel, G., Mazaira-Font, F. A. (2021). Decoupling synthetic control methods to
ensure stability, accuracy, and meaningfulness, SERIEs, 12(1), 549–584. DOI: 10.1007/s13209-021-00242-8.
Aleksanyan, L., Huiban, J. P. (2016). Economic and financial determinants of firm bankruptcy:
evidence from the French food industry, Review of Agricultural, Food and Environmental Studies, 97(2), 89-108. DOI: 10.1007/s41130-2016.
Barro, R. J. (1999). Determinants of Economic Growth: A Cross-Country Empirical Study,
American Political Science Association, 76(6), 1-55. DOI: 10.2307/2585721.
Bodul, D., Vuković, A. (2015). Još jedna reforma stečajnog zakonodavstva – funkcionalizacija
stečajno-pravne zaštite ili placebo efekt?, Zbornik Pravnog fakulteta Sveučilišta u Rijeci, 36(1), 181-212.
Cespedes, J., Thakor, R. T., Yang, K. (2022). The Ex Ante Effect of Bankruptcy Law:
Evidence from Chapter 12, 1-30. DOI: 10.2139/ssrn.4236600.
Cosci, S., and Meliciani, V. (2002). Multiple banking relationships: Evidence from the Italian
experience. Manchester School, 70(0), 37–54. DOI: 10.1111/1467-9957.70.s1.3.
Di Martino, P., Latham, M., Vasta, M. (2020). Bankruptcy Laws Around Europe (1850–2015):
Institutional Change and Institutional Features, Enterprise & Society, 21(4), 1-55. DOI: 10.1017/eso.2019.46.
Dvouletý, O., Srhoj, S., Pantea, S. (2021). Public SME grants and firm performance in
European Union: A systematic review of empirical evidence, Small Business Economics, 57, 243–263. DOI: 10.1007/s11187-019-00306-x.
Ferranti, D., Baumol, W., Malach, M., Pablos-Mendez, A., Tabish, H. and Wu, L. (2012). The Cost
Disease: Why Computers Get Cheaper but Healthcare Doesn't. New Haven, CT: Yale University Press. DOI: 10.12987/9780300188486.
Gonçalves, D., Martins, A. (2016). The Determinants of TFP Growth in the Portuguese
Manufacturing Sector, Boletin Mensan de Economia Portugesa, 9, 47-55.
Groningen Growth and Development Centre (GGDC). (2021). Penn World Table 10.0. Retrieved
from URL: https://www.rug.nl/ggdc/productivity/pwt/pwt-releases/pwt100.
Hiroki, T., Iwatsubo, K., Watkins, C. (2022). Does Firm-Level Productivity Predict Stock
Returns? Pacific-Basin Finance Journal, 72, 1-45. DOI: 10.1016/j.pacfin.2022.101710.
Hurst, E., Pugsley, B. W. (2011). What do Small Businesses Do? Brookings Papers on Economic
Activity, 43(2), 73-142. DOI: 10.1353/eca.2011.0017.
Jensen, M. C. (1986). Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers, The
American Economic Review, 76(2), 323-329.
Köke, J. (2001). Control Transfers in Corporate Germany: Their Frequency, Causes, and
Consequences, EFA 2001 Barcelona Meetings, p. 00-67.
Kreif, N., Grieve, R., Hangartner, D., Turner, A. J., Nikolova, S., Sutton, M. (2016).
Examination of the synthetic control method for evaluating health policies with multiple treated units, Health Econ, 25(12), 1514-1528. DOI: 10.1002/hec.3258.
Lim, Y., Hahn, C. H. (2009). Bankruptcy Policy Reform and Total Factor Productivity
Dynamics in Korea: Evidence from Microdata. In Ito, T., Rose, A. K., eds. Growth and Productivity in East Asia, NBER-East Asia Seminar on Economics, University of Chicago Press, 13: 10-33.
Lin, B., Chen, X. (2018). Is the implementation of the increasing block electricity prices policy
really effective? Evidence-based on the analysis of synthetic control method, Energy,
163(3), 734–750. DOI: 10.1016/j.energy.2018.08.178.
Miao, L., Zhuo, Y., Wang, H., Lyu, B. (2022). Non-Financial Enterprise
Financialization, Product Market Competition, and Total Factor Productivity of Enterprises, SAGE Open, 12(2), 1-15. DOI: 10.1177/21582440221089956.
Misra, B. S. (2019). Determinants of total factor productivity in Indian states, Indian Growth and
Development Review, 13(1), 259–82. DOI: org/10.1108/igdr-01-2019-0008.
Neira, J. (2017). Bankruptcy and Cross-Country Differences in Productivity. Journal of Economic
Behavior & Organization, 157, 1-47. DOI: 10.1016/j.jebo.2017.
Qi, X., Han, Y. (2021). Energy quota trading can achieve energy savings and emission
reduction: Evidence from China’s pilots, Environ. Sci. Pollut. Res., 28(1), 1-28. DOI: 10.1007/s11356-021-14409-0.
Sadeghi, A., Kibler, E. (2022). Do bankruptcy laws matter for entrepreneurship? A Synthetic
Control Method analysis of bankruptcy reform in Finland, Journal of Business Venturing Insights, 18(2), 1-9. DOI: 10.1016/j.jbvi.2022.
Sampaio, B. (2014). Identifying peer states for transportation policy analysis with an application
to New York’s handheld cell phone ban, Transp. A Transp. Sci., 10, 1–14. DOI: 10.1080/18128602.2012.688073.
Schweiger, H. (2011). The impact of state aid for restructuring on the allocation of resources,
EBRD Working Paper No. 127, 1-40. Available at SSRN: https://ssrn.com/abstract=2180457 or http://dx.doi.org/10.2139/ssrn.2180457.
Shao, W., Sun, Y., Bai, X., Naeem, M. A., Taghizadeh-Hesary, F. (2022). Zombie enterprises,
crowding out effect, and total factor productivity: Empirical evidence from Chinese manufacturing listed companies, International Journal of Finance & Economics, 28(4), 4512-4531. DOI: 10.1002/ijfe.
Tamayo, C. (2017). Bankruptcy choice with endogenous financial constraints, Review of Economic
Dynamics, 26, 225-242. DOI: 10.1016/j.red.2017.06.004.
Tomura, Hajime. (2007). Firms Dynamics, Bankruptcy Laws, and Total Factor Productivity, Bank
of Canada Working Paper, 17, 1-10. DOI: 10.34989/swp-2007-17.
Vollrath, D. (2019). Fully Grown: Why a Stagnant Economy Is a Sign of Success. The University of
Chicago Press, Chicago, and London. DOI: 10.7208/Chicago/9780226666143.001.0001.
World Bank. (2023). World Development Indicators. Retrieved from URL: https://datatopics.worldbank.org/world-development-indicators/.
Xia, H., Wu, S. (2021). Effect of the International Tourism Island Policy on Hainan Farmers’
Income and the Urban-rural Income gap: An analysis based on the GPCA and SCM Models. J. Adv. Comput. Intell. Intell. Inform., 25(5), 592–600. DOI: 10.20965/jaciii.2021.p0592.
Yamaguchi, K. (2022). The productivity impact of the government-led bailout of Japan Airlines,
Asian Transport Studies, 8, 1-9. ISSN 2185-5560. DOI: 10.1016/j.eastsj.2022.
Published
2023-12-06
How to Cite
Šergo Z., Gržinić J., & Sučić Červa M. (2023). Charting the Course: Total Factor Productivity Trends in Croatia Post-pre-bankruptcy Act. LeXonomica, 15(2), 189-212. https://doi.org/10.18690/lexonomica.15.2.189-212.2023
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Articles