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Economic Reforms and Productivity-Enhancing Reallocation in the Post-Soviet Transition

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  • J. David Brown
  • John Earle

Abstract

How do economic reforms affect resource reallocation processes and their contributions to productivity growth? This paper studies the consequences of enterprise privatization and liberalization of product markets, labour markets, and imports in the former Soviet Republics of Russia and Ukraine. Analyzing interfirm reallocation of output, labour, capital, and an input index with annual industrial census data from 1985 to 2001, we find that Soviet Russia displayed low reallocation rates that bore little relationship to relative labour and multifactor productivity across firms. Since reforms began, resource flows have increased in both countries, and their contributions to aggregate productivity growth have become substantial through increased flows from less productive to more productive continuing firms and through higher exits of less productive entities - i.e., through creative destruction. Among the policy factors that may explain firm-level variation, privatization is estimated to have positive effects on productivity-enhancing reallocation, but there is less evidence of such effects from domestic product market competition, labour market competition, or import penetration.

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Paper provided by Centre for Economic Reform and Transformation, Heriot Watt University in its series CERT Discussion Papers with number 0404.

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Date of creation: 2004
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Handle: RePEc:hwe:certdp:0404

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Keywords: reform; privatization; productivity growth; transition;

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Citations

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Cited by:
  1. Pierre, Gaelle & Scarpetta, Stefano, 2007. "How labor market policies can combine workers'protection with job creation : a partial review of some key issues and policy options," Social Protection Discussion Papers 41439, The World Bank.
  2. Jaan Masso & Raul Eamets & Kaia Philips, 2004. "Creative Destruction And Transition: The Effects Of Firm Entry And Exit On Productivity Growth In Estonia," Working Papers 38, CENTRE FOR THE STUDY OF ECONOMIC AND SOCIAL CHANGE IN EUROPE,School of Slavonic and East European Studies,University College London (SSEES,UCL).
  3. Bartelsman, Eric & Haltiwanger, John C. & Scarpetta, Stefano, 2004. "Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries," IZA Discussion Papers 1374, Institute for the Study of Labor (IZA).
  4. Kan, Viktoriya, 2010. "Regional Determinants of New Firm Formation in a Transition Economy: The Case of Uzbekistan," PIE/CIS Discussion Paper 490, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  5. Keane, Michael P. & Prasad, Eswar S., 2006. "Changes in the structure of earnings during the Polish transition," Journal of Development Economics, Elsevier, vol. 80(2), pages 389-427, August.
  6. J. David Brown & John S. Earle, 2004. "Job Reallocation and Productivity Growth in the Ukrainian Transition," Upjohn Working Papers and Journal Articles 04-104, W.E. Upjohn Institute for Employment Research.
  7. 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).
  8. Brown, J. David & Earle, John S., 2006. "The microeconomics of creating productive jobs : a synthesis of firm-level studies in transition economies," Policy Research Working Paper Series 3886, The World Bank.
  9. De Loecker, Jan & Konings, Jozef, 2006. "Job reallocation and productivity growth in a post-socialist economy: Evidence from Slovenian manufacturing," European Journal of Political Economy, Elsevier, vol. 22(2), pages 388-408, June.

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