Working Papers
Cross Country Differences in Job Reallocation: The Role of Industry, Firm Size and Regulations (with John Haltiwanger and Stefano Scarpetta)
Web appendix with some additional results is available here .
Data used in this paper are available here in Stata 9 format. Data for transition countries are averages for 1996-2001. Data for other countries are averages for 1989-2001. The exact periods covered in each country can be found in Table A.1 in Haltiwanger, Scarpetta and Schweiger (2010). For additional clarifications contact Helena Schweiger at 
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Latest version available as EBRD Working Paper No. 116. Previously titled The Relationship Between Job Flows Across Countries: The Role of Industry, Size and Institutions.
Abstract: Somewhat surprisingly, cross-country empirical evidence (at least in the cross section) does not seem to support the predictions of standard models that economies with stricter regulations on hiring and firing should have a lower pace of job reallocation. One problem in exploring these issues empirically has been the difficulty of comparing countries on the basis of harmonized measures of job reallocation. A related problem is that there may be unobserved measurement or other factors accounting for differences in job reallocation across countries. This paper overcomes these challenges by using harmonized measures of job creation and destruction in a sample of 16 industrial and emerging economies, exploiting the country, industry and firm size dimensions. The analysis of variance in the paper shows that firm size effects are a dominant factor in accounting for the variation in the pace of job reallocation across country, industry and size cells. However, even after controlling for industry and size effects there remain significant differences in job flows across countries that could reflect differences in labor market regulations. We use the harmonized data to explore this hypothesis with a difference-in-difference approach. We find strong and robust evidence that stringent hiring and firing regulations tend to reduce the pace of job reallocation.
The Impact of State Aid for Restructuring on the Allocation of Resources
Abstract: Recent empirical work has shown that the success of an economy depends largely on how successful it is in allocating inputs and outputs across businesses efficiently with minimum disruption and frictions. Market institutions that impact this allocation potentially account for productivity differences across countries. Existing studies use quite broad measures of institutions, mostly at the country level and/or using survey data with questionable representativeness. This paper is the first to use census micro level data on a market institution with a potentially very distortive effect, namely state aid for the rescue and restructuring of firms in difficulty. Such aid can postpone the exit of unprofitable firms and thus shift the burden of structural adjustment onto more efficient firms who are managing without it. We investigate the impact of this aid on static and dynamic efficiency of Slovenian manufacturing by combining the aid data with firm-level accounting data. Evaluating the impact of state aid on static and dynamic efficiency of an economy is difficult due to the lack of a counterfactual and because of selection bias. The latter arises because firms that receive aid may differ from firms that do not receive aid along other dimensions. We use treatment effects estimators that assume selection on observables (linear regression models) and estimators that explicitly allow for selection on unobservables (instrumental variables). Our identification strategy in the latter model involves using variables that affect the chances of getting aid before 2002, but not after. The empirical analysis reveals that state aid hindered the efficient static allocation of resources, as measured by the \citet{op96}-inspired micro covariance measure. None of the firms that received aid exited, aid had a positive impact on the growth rate of market shares, but did not have a significant impact on the growth of TFP. These results suggest that aid was distortive.
Impact of Changes in Wage Setting Policies on the Structure of Wages in Slovenia (with John Haltiwanger and Milan Vodopivec)
Abstract: In this paper, we study the structure of wages and the importance of firm and person fixed effects in explaining the variance of log real hourly wages in Slovenia, using a longitudinal matched employer-employee database. Most significant changes in employment and wage setting policies occurred in 1991, but the incomes policies still suppressed the growth of managerial wages until 1997. We find that this change brought about a change in the wage structure, with an increase in returns to education for the most educated workers. Our results also indicate that person fixed effects account for an overwhelming majority of variation in log real hourly wages, whereas firm fixed effects are not nearly as important.
Work in Progress
Labour Market Experiences and Their Impact on Attitudes (with Simon Commander and Ermal Hitaj)Published as a chapter in EBRD Transition Report 2007, working paper version coming soon.
Abstract: In this paper, we address the question of how individual experiences affect their views of themselves and the world (their country). Individuals in transition countries have experienced a number of changes in their professional and private lives since 1989, and there were differences across countries in terms of the start, the speed and the success of the transition process, all of which could have an impact on the individuals’ views. In addition to these macro level conditions, individuals’ views might depend on the attributes of their household and their individual attributes, such as their working status, age, gender, education, income, household structure, work/life history and the like. We use a unique Life in Transition survey (LITS) data, which allows us to exploit cross- and within-country variation and relate individuals’ objective circumstances to their views, relate their attitudes to their attributes, and explore differences between the participants and the non-participants in the labour market. Results indicate that the views of the individuals on the quality of life in 2006 compared to the quality of life in 1989 vary across countries and also within countries, which indicates that individual characteristics as described above have a role in forming individuals’ beliefs.
Worker Flows, Job Flows and Productivity Dynamics (with John Haltiwanger and Milan Vodopivec)