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Creative Destruction and Productivity Growth in an Emerging Economy: Evidence from Slovenian Manufacturing

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  • De Loecker, Jan
  • Konings, Jozef

Abstract

In most transition countries the aggregate level evidence suggests that most industries are just destroying jobs, due to the legacy of communism where over-manning levels of employment were the norm. This Paper sheds light on whether the transition process in Slovenian manufacturing has been one of just destruction or in contrast one of creative destruction. To this end we start by documenting gross job flows for the Slovenian manufacturing sector between 1994 and 2000. In contrast to slowly reforming transition economies where the transition process in manufacturing is characterized by little job creation and high job destruction, we find for Slovenian manufacturing a process of both substantial job creation and destruction. This indicates that restructuring in Slovenia involves a substantial reallocation process. We find higher job reallocation in private and small firms where the contribution of entry and exit to the job reallocation process is higher. We further use the Olley-Pakes methodology to estimate total factor productivity (TFP) and show that TFP has increased in most sectors. We find that this is mainly driven by existing firms becoming more efficient and by the net entry process, i.e. more efficient firms enter the industry.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4238.

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Date of creation: Feb 2004
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Handle: RePEc:cpr:ceprdp:4238

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Keywords: creative destruction; reallocation; total factor productivity;

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References

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  1. Jan De Loecker, 2004. "Do Exports Generate Higher Productivity? Evidence from Slovenia," LICOS Discussion Papers 15104, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  2. George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
  3. Donald W.K. Andrews, 1988. "Asymptotic Normality of Series Estimators for Nonparametric and Semiparametric Regression Models," Cowles Foundation Discussion Papers 874R, Cowles Foundation for Research in Economics, Yale University, revised May 1989.
  4. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  5. Pakes, Ariel & Olley, Steven, 1995. "A limit theorem for a smooth class of semiparametric estimators," Journal of Econometrics, Elsevier, vol. 65(1), pages 295-332, January.
  6. Robinson, Peter M, 1988. "Root- N-Consistent Semiparametric Regression," Econometrica, Econometric Society, vol. 56(4), pages 931-54, July.
  7. Haltiwanger, John C. & Vodopivec, Milan, 2002. "Worker Flows, Job Flows and Firm Wage Policies: An Analysis of Slovenia," IZA Discussion Papers 569, Institute for the Study of Labor (IZA).
  8. John Hutchinson, 2003. "Is there a Lower Bound to the Firm Size Distribution Comparing Transition Economies with an Established Market Economy," LICOS Discussion Papers 13503, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  9. M Schaffer, 1996. "Job Creation and Job Destruction in a Transition Economy: Ownership," CEP Discussion Papers dp0282, Centre for Economic Performance, LSE.
  10. Faggio, Giulia & Konings, Jozef, 2003. "Job creation, job destruction and employment growth in transition countries in the 90s," Economic Systems, Elsevier, vol. 27(2), pages 129-154, June.
  11. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  12. Aghion, Philippe & Blanchard, Olivier & Burgess, Robin, 1994. "The behaviour of state firms in eastern Europe, pre-privatisation," European Economic Review, Elsevier, vol. 38(6), pages 1327-1349, June.
  13. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
  14. J. Konings & H. Lehmann & M.E. Schaffer, 1996. "Job Creation and Job Destruction in a Transition Economy: Ownership, Firm Size," CERT Discussion Papers 9611, Centre for Economic Reform and Transformation, Heriot Watt University.
  15. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
  16. Stephen R. Yeaple & Wolfgang Keller, 2003. "Multinational Enterprises, International Trade, and Productivity Growth," IMF Working Papers 03/248, International Monetary Fund.
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Cited by:
  1. Jaan Masso & Raul Eamets & Kaia Philips, 2004. "Firm Demographics And Productivity Dynamics In Estonia," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 25, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  2. Maria Bas & Ivan Ledezma, 2008. "Trade liberalization and heterogeneous within-firm productivity improvements," PSE Working Papers halshs-00590303, HAL.
  3. Masso, Jaan & Eamets, Raul & Philips, Kaia, 2004. "Creative Destruction and Transition: The Effects of Firm Entry and Exit on Productivity Growth in Estonia," IZA Discussion Papers 1243, Institute for the Study of Labor (IZA).

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