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

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  • Brown, J. David

    ()
    (U.S. Census Bureau)

  • Earle, John S.

    ()
    (George Mason University)

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, labor markets, and imports in the former Soviet Republics of Russia and Ukraine. Analyzing interfirm reallocation of output, labor, 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 labor 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 both 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-relevant 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, labor market competition, or import penetration.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1044.

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Length: 49 pages
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:iza:izadps:dp1044

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Keywords: job creation; creative destruction; reallocation; productivity; Russia; Ukraine;

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Cited by:
  1. Kan, Viktoriya, 2010. "Regional Determinants of New Firm Formation in a Transition Economy: The Case of Uzbekistan," PIE/CIS Discussion Paper, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University 490, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  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, CENTRE FOR THE STUDY OF ECONOMIC AND SOCIAL CHANGE IN EUROPE,School of Slavonic and East European Studies,University College London (SSEES,UCL) 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. Eric J. Bartelsman & John Haltiwanger & Stefano Scarpetta, 2004. "Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries," Tinbergen Institute Discussion Papers, Tinbergen Institute 04-114/3, Tinbergen Institute.
  4. J. David Brown & John Earle, 2004. "Job Reallocation and Productivity Growth in the Ukrainian Transition," CERT Discussion Papers, Centre for Economic Reform and Transformation, Heriot Watt University 0407, Centre for Economic Reform and Transformation, Heriot Watt University.
  5. 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.
  6. Keane, Michael P. & Prasad, Eswar, 2002. "Changes in the Structure of Earnings During the Polish Transition," IZA Discussion Papers 496, Institute for the Study of Labor (IZA).
  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, Faculty of Economics and Business Administration, University of Tartu (Estonia) 25, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  8. 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, Elsevier, vol. 22(2), pages 388-408, June.
  9. 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, The World Bank 3886, The World Bank.

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