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

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Author Info

  • De Loecker, Jan

    ()
    (Princeton University)

  • Konings, Jozef

    ()
    (K.U.Leuven)

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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 971.

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Length: 41 pages
Date of creation: Dec 2003
Date of revision:
Publication status: published as 'Job reallocation and productivity growth in a post-socialist economy: Evidence from Slovenian manufacturing' in: European Journal of Political Economy, 2006, 22 (2), 388-408
Handle: RePEc:iza:izadps:dp971

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Keywords: creative destruction; total factor productivity; reallocation;

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References

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  1. Faggio, Giulia & Konings, Jozef, 2003. "Job creation, job destruction and employment growth in transition countries in the 90s," Economic Systems, Elsevier, Elsevier, vol. 27(2), pages 129-154, June.
  2. John Hutchinson, 2003. "Is there a Lower Bound to the Firm Size Distribution Comparing Transition Economies with an Established Market Economy," LICOS Discussion Papers, LICOS - Centre for Institutions and Economic Performance, KU Leuven 13503, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  3. J. Konings & H. Lehmann & M.E. Schaffer, 1996. "Job Creation and Job Destruction in a Transition Economy: Ownership, Firm Size," CERT Discussion Papers, Centre for Economic Reform and Transformation, Heriot Watt University 9611, Centre for Economic Reform and Transformation, Heriot Watt University.
  4. Haltiwanger, John C. & Vodopivec, Milan, 2002. "Worker Flows, Job Flows and Firm Wage Policies: An Analysis of Slovenia," IZA Discussion Papers, Institute for the Study of Labor (IZA) 569, Institute for the Study of Labor (IZA).
  5. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, Oxford University Press, vol. 70(2), pages 317-341.
  6. Andrews, Donald W K, 1991. "Asymptotic Normality of Series Estimators for Nonparametric and Semiparametric Regression Models," Econometrica, Econometric Society, Econometric Society, vol. 59(2), pages 307-45, March.
  7. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262540932, December.
  8. Jan De Loecker, 2004. "Do Exports Generate Higher Productivity? Evidence from Slovenia," LICOS Discussion Papers, LICOS - Centre for Institutions and Economic Performance, KU Leuven 15104, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  9. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, Econometric Society, vol. 64(6), pages 1263-97, November.
  10. Stephen R. Yeaple & Wolfgang Keller, 2003. "Multinational Enterprises, International Trade, and Productivity Growth," IMF Working Papers, International Monetary Fund 03/248, International Monetary Fund.
  11. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  12. Pakes, Ariel & Olley, Steven, 1995. "A limit theorem for a smooth class of semiparametric estimators," Journal of Econometrics, Elsevier, Elsevier, vol. 65(1), pages 295-332, January.
  13. M Schaffer, 1996. "Job Creation and Job Destruction in a Transition Economy: Ownership," CEP Discussion Papers, Centre for Economic Performance, LSE dp0282, Centre for Economic Performance, LSE.
  14. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 62(1), pages 53-82, January.
  15. Aghion, Philippe & Blanchard, Olivier & Burgess, Robin, 1994. "The behaviour of state firms in eastern Europe, pre-privatisation," European Economic Review, Elsevier, Elsevier, vol. 38(6), pages 1327-1349, June.
  16. Robinson, Peter M, 1988. "Root- N-Consistent Semiparametric Regression," Econometrica, Econometric Society, Econometric Society, vol. 56(4), pages 931-54, July.
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Cited by:
  1. Maria Bas & Ivan Ledezma, 2008. "Trade liberalization and heterogeneous within-firm productivity improvements," PSE Working Papers, HAL halshs-00590303, HAL.
  2. 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, Institute for the Study of Labor (IZA) 1243, Institute for the Study of Labor (IZA).
  3. 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).

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