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The last bar of Figure III.3 shows large coefficient effects of ownership, suggesting an important contribution of faster growth (or slower decline) of state-owned and privatized firms in the EU8 compared to the SEE group. This can be interpreted as more advanced adaptation/restructuring of these enterprises in the former group of countries, the leaders in economic transition. Also interesting is the effect of the difference in endowments in privatized firms, which also contributes to faster employment growth in the EU8. The major negative contribution to faster growth in that region is the coefficient effect of firm size in the private sector, which may indicate maturation of new private firms or the exhaustion of growth opportunities due to increased competition (see also the discussion in the next section below on competition). Overall, we observe a kind of catching-up story: the new private sector boom is further advanced and slowing down in the EU8 countries, but the downsizing of the state sector is also further advanced and slowing down. The results for average employment growth (see Figure III.4) are similar, except for much less pronounced ownership effects.

A comparison of the EU8 and CIS countries is shown in Figures III.5-III.6. Qualitatively, the results are remarkably similar to what we have found in the comparison of the EU8 versus SEE countries. In particular, the private sector is growing faster in the CIS than in the EU8 group, which is to a large extent a consequence of a much faster sectoral growth (in particular, in manufacturing) rather than a size effect.

Given the remarkable similarities in the last two comparisons, it is of interest to benchmark the SEE group with the CIS countries. The results of this decomposition are shown in Figures III.7-III.8. The weighted/aggregate employment story is that the SEE and CIS new private sectors are almost identical; the big difference is the much bigger downsizing of the SOE and privatized sectors in SEE. The unweighted/average firm story is that SEE and CIS look similar across all sectors. The observed difference between the weighted and unweighted stories implies that the SOE/privatized downsizing in SEE is more concentrated in the larger firms. The catching up story evidently does not hold in the CIS, since inasmuch as it is less advanced in the transition compared to the


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