Job reallocation and productivity growth in a post-strongsocialiststrong.pdfVIP

European Journal of Political Economy Vol. 22 (2006) 388–408 /locate/ejpe Job reallocation and productivity growth in a post-socialist economy: Evidence from Slovenian manufacturing Jan De Loecker a,*, Jozef Konings a,b,c a Department of Economics and LICOS, Katholieke Universiteit Leuven, Deberiotstraat 34, 3000 Leuven, Belgium b CEPR, London, UK c IZA, Bonn, Germany Received 20 August 2004; received in revised form 1 March 2005; accepted 23 September 2005 Available online 14 November 2005 Abstract This paper studies whether job reallocation in Slovenia, a post-socialist economy, has been associated with gains in total factor productivity (TFP). We document the importance of entry and exit in job reallocation and show that TFP has increased mainly due to existing firms’ increasing efficiency and through net entry of firms. Underlying aggregate TFP growth is job destruction by state firms and reallocation of employment to private firms. D 2005 Elsevier B.V. All rights reserved. JEL classification: L60; D21; P20 Keywords: Creative destruction; Total factor productivity; Reallocation 1. Introduction High labor market turbulence in market and non-market economies has been documented many times. 1 Gross flows of jobs relative to net flows are high, persistent, fluctuate over the business cycle, and vary between countries (e.g. Messina et al., 2004; Goos, 2003), and simultaneous job * Corresponding author. Tel.: +32 16 326582; fax: +32 16 326599. E-mail address: j