Haltiwanger, Lehmann and Terrell 2003; Iwasaki 2007), we briefly summarize here the main findings in this field.
We begin with a caveat, namely that scholars in the field have faced considerable difficulties in measuring firm performance in the transition environment. For example, as pointed out in Bevan, Estrin and Schaffer (1999) and also acknowledged in Djankov and Murrell (2002), indicators that are based on capital stock, assets, or equity may be very noisy and uninformative of the actual performance of firms because of the high inflation rates, deficiencies in the accounting standards or underdevelopment of stock markets in the transition economies. Therefore, the bulk of studies in the field rely on the measures of performance that are based on employment and sales (e.g., growth of sales, employment labor productivity), as the least noisy indicators, particularly employment. Another related problem is that some indicators may be suitable for the analysis of the traditional firms, but fail to provide a meaningful comparison between them and the newly established businesses. The latter may expand labor rapidly but sometimes have, or appear to have, falling labor productivity because they are expanding employment faster than sales. The appearance rather than the reality may be driven by reporting biases: greater reluctance to share information about growing sales than growing employment. Labor shedding, on the other hand, is a characteristic of SOEs and privatized firms in early and middle transition.
Haltiwanger et al. (2003) provide a thorough survey of studies analyzing employment growth, job creation and destruction in the transition economies. Based on the evidence from Bulgaria, Hungary and Romania (Bilsen and Konings 1998), the Czech Republic (Jurajda and Terrell 2002), Estonia (Haltiwanger and Vodopivec 2002), and Poland (Konings, Lehmann and Schaffer 1996) they conclude that small and new private firms contribute disproportionately to job creation while state-owned firms are responsible for most of the job destruction. Another important conclusion from the literature is that the patterns of employment growth, job creation and job destruction vary over the transition period: job destruction dominates job creation in the early transition period, but the magnitude of the two processes converges at the later stages. In particular, already by