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1995 the job reallocation rates in the CEE countries are similar to those in mature capitalist economies (about 20 percent) with roughly equal job creation and destruction rates (Davis and Haltiwanger 1999).

The general patterns evident in the BEEPS data are broadly in accord with these earlier findings of firm growth. Table III.1 shows the balance between growing and shrinking firms, i.e., the proportion of the sample of firms that is growing less the proportion that is shrinking (no growth firms are ignored). Here and below, growth is in real terms and covers the 3 years preceding the survey. Germany was in a period of macroeconomic stagnation during the period 2001-04, and this is apparent in the table, with the share of firms with growing sales exceeding the share of shrinking firms by only 5 percentage points. The cohesion countries, by contrast, were growing rapidly, with the number of firms with growing sales exceeding the shrinking share by 30 percentage points. The EU8 look very similar, and also show a moderate slowdown over the full period covered by the BEEPS surveys. An acceleration in growth is very apparent in the poorest countries/slowest reformers (middle income and low income CIS), going from near stagnation in 1996-99 to rapid expansion in 2002-05.

The picture in terms of employment is more muted. The number of firms with expanding employment in the EU8 has barely exceeded the number of downsizing firms from the very start of the BEEPS surveys. This share is, moreover, low compared to that in the cohesion countries. Here we see the first evidence of a possible failure of convergence: evidence of possible stagnating job growth in the EU8 members. We will return to this point below. The pattern in the other regions is quite different: in SEE, firms expanding employment have markedly outnumbered firms shedding labor since 1996-99; and in the middle income CIS and low income countries, stagnation in 1996-99 is replaced by large- scale expansion in more recent years.

Part of the explanation can be attributed to continued downsizing of employment and restructuring of state-owned and privatized firms. By 2005, these firms are sharing in the output expansion in TEs with new private firms, but are still shedding labor. Privatized

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