DP3218 What Drives the Speed of Job Reallocation During Episodes of Massive Adjustment?

Author(s): Stepan Jurajda, Katherine Terrell
Publication Date: February 2002
Keyword(s): job creation, job destruction, transition
JEL(s): E00, J20, O10, O40, P20
Programme Areas: Labour Economics, Transition Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3218

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.