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Job Creation and Job Destruction in Estonia: Labour Reallocation and Structural Changes

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Author Info

  • Masso, Jaan

    ()
    (University of Tartu)

  • Eamets, Raul

    ()
    (University of Tartu)

  • Philips, Kaia

    ()
    (University of Tartu)

Abstract

This article documents and analyses gross job flows and their determinants in Estonia over the years 1995-2001, using a database containing the population of officially registered firms in Estonia (all in all 52,000). Our results show that job creation and job destruction rates have been rather high in Estonia and are comparable to the levels documented for the US. We find that the firm-specific component in job flows excess of employment change had relatively lower importance than in western studies due to the emergence of small and medium-sized enterprises and labour reallocation between the economic sectors. The high inter-sectoral mobility has helped maintain high levels of job flows, while both are high also due to a favourable institutional environment, especially due to low start-up costs and a large share of micro enterprises in Estonia. When investigating job creation and destruction at the firm level by estimating firms' growth equations, we detected a negative effect of their size and age on the growth of firms, especially of domestic firms. The job flows have not decreased recently, although worker flows have dropped. One explanation is provided by labour market institutional framework, while the other one relates to the concept of churning flows (the difference between worker and job flows).

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1707.

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Length: 41 pages
Date of creation: Aug 2005
Date of revision:
Publication status: published in: H. Hannula, S. Radoševic and N. von Tunzelmann (eds.) , Estonia, the New EU Economy, Building a Baltic Miracle. Ashgate Publishing, 2006, pp. 105-142
Handle: RePEc:iza:izadps:dp1707

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Keywords: churning flows; worker flows; job destruction; job creation; Estonia;

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References

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  1. Simon Burgess & Julia Lane & David Stevens, 1996. "Job Flows, Worker Flows and Churning," Labor and Demography 9604004, EconWPA.
  2. John T. Addison & Paulino Teixeira, 2003. "The Economics of Employment Protection," Journal of Labor Research, Transaction Publishers, vol. 24(1), pages 85-129, January.
  3. Caballero, Ricardo J. & Hammour, Mohamad L., 1996. "On the ills of adjustment," Journal of Development Economics, Elsevier, vol. 51(1), pages 161-192, October.
  4. Steve J. Davis & John Haltiwanger, 1991. "Gross job creation, gross job destruction and employment reallocation," Working Paper Series, Macroeconomic Issues 91-5, Federal Reserve Bank of Chicago.
  5. Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805 Elsevier.
  6. Campos, Nauro F & Dabusinskas, Aurelijus, 2002. "So Many Rocket Scientists, so Few Marketing Clerks: Occupational Mobility in Times of Rapid Technological Change," CEPR Discussion Papers 3531, C.E.P.R. Discussion Papers.
  7. John Baldwin & Timothy Dunne & John Haltiwanger, 1998. "A Comparison Of Job Creation And Job Destruction In Canada And The United States," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 347-356, August.
  8. Aghion, Philippe & Howitt, Peter, 1994. "Growth and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 477-94, July.
  9. 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.
  10. Sanghoon Ahn, 2001. "Firm Dynamics and Productivity Growth: A Review of Micro Evidence from OECD Countries," OECD Economics Department Working Papers 297, OECD Publishing.
  11. Raul Eamets & Urmas Varblane & Kaja Sostra, 2003. "External Macroeconomic Shocks and the Estonian economy: How did the Russian Financial Crisis affect Estonian Unemployment and Foreign Trade?," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 3(2), pages 5-24, July.
  12. Alessandro Acquisti & Hartmut Lehmann, 2000. "Job Creation and Job Destruction in the Russian Federation," Trinity Economics Papers, Trinity College Dublin, Department of Economics 20001, Trinity College Dublin, Department of Economics.
  13. Swati Basu & Saul Estrin & Jan Svejnar, 1997. "Employment and wage behaviour of industrial enterprises in transition economies: The cases of Poland and Czechoslovakia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 5(2), pages 271-287, November.
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Citations

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Cited by:
  1. Jaan Masso & Urmas Varblane & Priit Vahter, 2007. "The Impact Of Outward Fdi On Home-Country Employment In A Low-Cost Transition Economy," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 52, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  2. Saima Bashir & Tesfa Gebremedhin, 2011. "An Analysis of the Relationship Between New Firm Formation and Economic Development in the Northeast Region of the United States," Working Papers 201102, Regional Research Institute, West Virginia University.

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