In this chapter, we noted that successful economies are more likely to have many failing firms. If a nation’s government instead made it impossible for inefficient firms to fail by giving them loans, cash grants, and other bailouts to stay in business, why is that nation likely to be poor? (Hint: Steven Davis and John Haltiwanger. 1999. “Gross Job Flows.”

In Handbook of Labor Economics (Amsterdam:

North-Holland) found that in the United States, 60% of the increase in U.S. manufacturing efficiency was caused by people moving from weak firms to strong firms.) : lop96