How do job creation, destruction and reallocation compare in transition and developed market economies? Previous such comparisons have been made by Konings et al. (1996), Davis and Haltiwanger (1999), Haltiwanger and Vodopivec (2002), and the papers in the symposium edited by Haltiwanger et al. (2003). These studies typically show that during the socialist period and in the early years of transition, gross job creation rates in state-owned manufacturing did not change hugely and were similar to those in the OECD, while job destruction rates in the state-owned sector following the start of transition increased dramatically and then decline. New private sector firms, by contrast, show high rates of job creation, job destruction, with the former predominant especially in the early phase of transition. It should be noted that such comparisons need to be interpreted with caution as they were hampered by lack of full compatibility of samples; in particular, studies for TEs have typically used firm-level data, whereas studies of JC/JD in Western economies have used establishment-level data. In this respect, the BEEPS data offer a better opportunity for such comparison. The data presented in Table III.3 show that for the later transition period, the job reallocation rate is actually no higher in the TEs than in the cohesion countries – about 20% – and has been very steady in the TEs.
A more detailed picture of regional patterns and convergence in firm growth can be obtained from a decomposition analysis of employment growth.5 This can help answering such questions as to what extent the differences in the employment growth rates observed across regions are due to the differences in the endowments of the respective economies –specifically, ownership, sectoral distribution, and size of firms – or stem from different relationships between these characteristics and firm growth across the regions. For example, we expect that “traditional” (state-owned and privatized) firms will contribute less to employment growth than the new private sector. The sectoral distribution of employment across traditional and new private firms is different in the EU8 countries and in the CIS countries. How much of the difference in the employment growth rates between the two groups of economies should we attribute to having different
We used Ben Jann’s (2005) “decompose” addin for Stata for the decompositions in this section.