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In a competitive industry, the exit and takeover of less efficient firms enable reallocation of resources for more effective use, and improve the economic efficiency of an industry as a whole. The rapidly-growing cut flower exporting industry in Ethiopia recently slowed in expansion with newly entering firms, whereas the industry continued to grow in export. We constructed the primary panel of the flower exporters Our analysis reveal that less profitable firms started to exit the industry, and that firms endowed with rich local resources were increasingly taken over and improved productivity and profitability.
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