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What Drives the Speed of Job Reallocation During Episodes of Massive Adjustment?

  • Jurajda, Štepán

    ()

    (CERGE-EI)

  • Terrell, Katherine

    (University of Michigan)

This paper uses individual-level data to characterize economy-wide job creation and destruction during periods of massive structural adjustment. We contrast the gradualist Czech and the rapid Estonian approach to the destruction of the communist economy to provide evidence on selected macroeconomic theories of reallocation with frictions. We find that gradualism (slowing down job destruction) effectively synchronizes job creation and destruction. Drastic job destruction leads to little or no slowdown of job creation. Small newly established firms are the under-researched fountainhead of jobs during the transition from communist to market oriented economies. JEL Classification: E0, J2, O1, O4, P2.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 601.

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Length: 46 pages
Date of creation: Oct 2002
Date of revision:
Publication status: published as "Job Reallocation in Two Cases of Massive Adjustment in Eastern Europe" in: World Development, 2008, 36 (11), 2144-2169
Handle: RePEc:iza:izadps:dp601
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