Turbulence and growth in West-Germany: A comparison of evidence by regions and industries

Abstract. This article investigates the relationship between some aspects of market dynamics and economic development in subsequent time periods. Different approaches to test a turbulence-growth hypothesis are compared using data on entries and exits in West Germany. Analyses on the levels of industries and regions come to contradicting test&s. The discussion of these contradictions leads to two main conclusions: (1) only interregional analysis provides a proper test of the turbulence-growth hypothesis, and (2) such an analysis on the level of regions must account for the industrial structure within the regions. In the regional context, a positive relation between entry rate and economic development can only be found for start-ups in manufacturing. Key words: New-firm formation, deaths of firms, turbulence, economic development, creative destruction, market life-cycle. I