From a model by Hopenhayn, three hypotheses can be derived: (H1) Firms that exit in year t were less productive in t-1 than firms that continue to produce in t. (H2) Firms that enter in year t are less productive than incumbent firms in year t. (H3) Surviving firms from an entry cohort were more...

Using newly available representative longitudinal data for German manufacturing enterprises over the period 1999 to 2006 this study presents the first comprehensive empirical evidence on subsidized and non-subsidized firms in East and West Germany. The share of subsidized firms in all firms was...