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

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  • Jan De Loecker
  • Jozef Konings

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Abstract

In most transition countries the aggregate level evidence suggests that most industries are just destroying jobs, due to the legacy of communism where overmanning 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.

Suggested Citation

  • Jan De Loecker & Jozef Konings, 2003. "Creative Destruction and Productivity Growth in an Emerging Economy Evidence from Slovenian Manufacturing," LICOS Discussion Papers 13803, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  • Handle: RePEc:lic:licosd:13803
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    File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp138.pdf
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    References listed on IDEAS

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    Cited by:

    1. Vergara, Sebastián, 2005. "The dynamic of employment in Chilean industry," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    2. Maria Bas & Ivan Ledezma, 2008. "Trade liberalization and heterogeneous within-firm productivity improvements," PSE Working Papers halshs-00590303, HAL.
    3. 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 1243, Institute for the Study of Labor (IZA).
    4. 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 25, Faculty of Economics and Business Administration, University of Tartu (Estonia).

    More about this item

    Keywords

    creative destruction; total factor productivity; reallocation;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General

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