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and state-owned firms, especially SMEs, are rare in the cohesion countries and are almost absent from the cohesion country samples. Table III.2 shows that in terms of sales, state- owned and privatized firms in TEs went from being relatively stagnant in 1996-99 to predominantly expanding 2002-05, and indeed the share of firms with expanding sales in the latter period was very similar for state-owned, privatized and new private firms. In terms of employment, however, state-owned and privatized firms had large shares of downsizing firms during the period spanned by the BEEPS, though declining over time. This is in contrast to the new private firm sector, which was expanding employment. These patterns of employment growth have been previously found in earlier studies based on smaller samples covering one or few transition countries, such as Richter and Schaffer (1996), Earle, Estrin and Leshchenko (1996) and Bilsen and Konings (1998), among others. What is interesting and new in the BEEPS data is that the downsizing of the traditional firms, according to the BEEPS data, continues in all the regions even a decade after the start of transition.

Table III.3 looks at job growth in the more concrete terms of job creation (JC), job destruction (JD), net job growth (JG) and job reallocation (JR) rates, thus focusing on aggregate employment growth. The picture is rather different from what one finds in the balance table, Table III.1, because that table simply counts firms, and the smaller firms are more likely to be expanding but contribute less to the aggregate growth. The table shows that job growth (defined as JCR-JDR) is higher in the richer TEs in the 1996-99 period, but this reverses by 2002-05, when the poorer TEs have faster employment growth. The reversal is driven by both job creation and job destruction. Job creation rates in the EU8 are lower than those in the cohesion countries, and the acceleration in JC takes the poorer TEs ahead of the EU8 by 2002-05. Job destruction rates are persistently higher in the EU8 than in the cohesion countries, and fall markedly in the poorer TEs so that by 2002-05, job destruction is less common than in the EU8. Job reallocation (defined as JC+JD) is, however, fairly constant across time and across groups of TEs. Again, these patterns are broadly consistent with previous literature suggesting that high rates of job destruction are typical of the earlier stage of the transition process and level off over time while job creation rates increase (Haltiwanger et al. 2003).


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