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Who Creates Jobs in Hungary? The Role of Entering, Exiting and Continuing Firms Before and During the Crisis


  • John Sutherland Earle

    () (George Mason University, Central European University)

  • Almos Telegdy

    () (Institute of Economics of the Hungarian Academy of Sciences)


Using a large panel of Hungarian firms, we study the relation between firm size and net job creation. Categorizing firms in size groups with the traditionally used measure of employment size in the base year suggests that small firms create a disproportionally higher number of jobs than large enterprises. This relation declines when average employment size is used instead, and it reverses when firm age is controlled for. The crisis brought about large declines in employment across all types of firms. The analysis reveals that the main reason for this declines is the increased job destruction rates. Whole job creation rates were stable during the crisis, job destruction increased by about 4 percentage points. We find that the net growth of exporting and foreign-owned firms was reduced the most by the crisis, while state-owned firms kept most of the pre-crisis jobs.

Suggested Citation

  • John Sutherland Earle & Almos Telegdy, 2011. "Who Creates Jobs in Hungary? The Role of Entering, Exiting and Continuing Firms Before and During the Crisis," Budapest Working Papers on the Labour Market 1108, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  • Handle: RePEc:has:bworkp:1108

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    References listed on IDEAS

    1. J. David Brown & John S. Earle & Almos Telegdy, 2006. "The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 61-99, February.
    2. Chesher, Andrew, 1979. "Testing the Law of Proportionate Effect," Journal of Industrial Economics, Wiley Blackwell, vol. 27(4), pages 403-411, June.
    3. J. DavidBrown & JohnS. Earle & Álmos Telegdy, 2010. "Employment and Wage Effects of Privatisation: Evidence from Hungary, Romania, Russia and Ukraine," Economic Journal, Royal Economic Society, vol. 120(545), pages 683-708, June.
    4. Davis, Steven J & Haltiwanger, John & Schuh, Scott, 1996. "Small Business and Job Creation: Dissecting the Myth and Reassessing the Facts," Small Business Economics, Springer, vol. 8(4), pages 297-315, August.
    5. John C. Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010. "Who Creates Jobs? Small vs. Large vs. Young," NBER Working Papers 16300, National Bureau of Economic Research, Inc.
    6. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    7. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W, 1996. "A Theory of Privatisation," Economic Journal, Royal Economic Society, vol. 106(435), pages 309-319, March.
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    Cited by:

    1. Békés, Gábor & Muraközy, Balázs, 2012. "Magyar gazellák. A gyors növekedésű vállalatok jellemzői és kialakulásuk elemzése
      [Hungarian gazelles: what makes a high-growth firm in Hungary?]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 233-262.
    2. Dorothea Schäfer & Susan Steiner, 2014. "Financial Development and Employment: Evidence from Transition Countries," Discussion Papers of DIW Berlin 1390, DIW Berlin, German Institute for Economic Research.
    3. Galasi, Péter & Cseres-Gergely, Zsombor & Bakó, Tamás, 2013. "Az MTA KRTK KTI munkaerő-piaci előrejelző rendszere
      [The Institute of Economics labour-market forecasting system]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 117-133.

    More about this item


    Small and Medium Enterprises; employment; job creation; growth; Hungary;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements


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