Productivity and Inequality Effects of Labor Reallocation Transition -- Insights from a A Meta-Analysis of Studies on Transition

Productivity and inequality eﬀects of rapid labor reallocation
Productivity and inequality eﬀects
of rapid labor reallocation
A meta-analysis
Jan Svejnar - Joanna Tyrowicz - Lucas van der Velde
MAER-Net, Prague
September, 2015

Introduction
Introduction
Why do we do it?
Economic shocks → reallocation → inequalities and productivity growth.

Introduction
Introduction
Why do we do it?
Transition as a quasi-natural experiment.
Policy recommendations very much based on the optimal speed of
transition (OST) - right or wrong?

Introduction
Introduction
Why do we do it?
What do we do?
A quantitative overview of the results availabile in the literature

Introduction
Introduction
Why do we do it?
What do we do?
A quantitative overview of the results availabile in the literature
Spoilers
Nothing is what it seems (even to the Authors)

Introduction
Links in the literature
Aghion and Blanchard (1994) theory: the optimal speed of
transition
1 Inefficient public sector fires.
2 Emerging private sector hires.
3 If firing desynchronized with hiring, labor tax wedge (to pay benefits) kills
job creation, possibly too much despite downward pressure on expected
wages → unstable equilibria.
4 Government can control the rate of firing, to make the two synchronized.

Introduction
transition
Links to productivity.

Introduction
transition
Links to productivity.
Links to inequalities.

Methods and data
Key concepts and data sources
Worker ﬂows vs Job ﬂows
Literature
Life in Transition Survey (LiTS)

Methods and data
Key concepts and data sources
Worker ﬂows vs Job ﬂows
Literature
Life in Transition Survey (LiTS)
Productivity
Conference Board database: GDP per employee (chain index
avg. 1980 =100)
Inequalities
World Income Inequality Database compiled by United Nations

Methods and data
“Meta-analysis”

Methods and data
“Meta-analysis”
The process of data collection
1 EconLit database: Keywords ”Reallocation” and ”Transition”.
2 Restricted to empirical papers in English with available direct
measures.
3 131 hits, of which 13 were useful + 5 (bibliographic search).

Methods and data
“Meta-analysis”
The process of data collection
1 EconLit database: Keywords ”Reallocation” and ”Transition”.
2 Restricted to empirical papers in English with available direct
measures.
3 131 hits, of which 13 were useful + 5 (bibliographic search).
455 ﬂow estimates.
10 transition economies, 18 years.

Methods and data
Countries and years under analysis
EST RUS UKR BGR POL ROM SVN SVK CZE HUN
# of papers 2 2 3 1 3 1 2 1 1 1
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003

Methods and data
Job and Worker ﬂows
Comparison to ﬂows from the Life in Transition Survey
Notes: Job creation and Hirings (right) and Job destruction and Separations (left)

Results
Results
Highlights
1 Little support for simple stories of transition: a
“meta-regression” of existing papers
2 Short run trade-oﬀ? Inequality increases with JD, lack of
correlations to productivity growth.
3 What really matters in the long run?

Results
Putting the evidence together: a “meta-regression”
Variable Job creation Job destruction
Only public firms -3.343*** -6.676***
(0.867) (2.086)
Only in manufacturing -7.602*** -8.051***
(2.156) (2.507)
Only large firms -4.095*** -3.871**
(1.749) (2.282)
Only small firms 11.86*** 4.761
(3.959) (4.211)
Controls for article No Yes
Controls for country No Yes
Controls for year No Yes
# of observations 345 345
R2
0.174 0.253
Notes: Results correspond to the subsample of estimates on job flows.

Results
Putting the evidence together: a “meta-regression”
Variable Job creation Job destruction
Only public firms -3.343*** -6.676*** -0.243 -0.663
(0.867) (2.086) (0.908) (0.750)
Only in manufacturing -7.602*** -8.051*** 2.403*** -0.853
(2.156) (2.507) (0.782) (0.652)
Only large firms -4.095*** -3.871** 0.298 -1.291
(1.749) (2.282) (0.725) (0.985)
Only small firms 11.86*** 4.761 7.832*** 3.800***
(3.959) (4.211) (1.595) (1.348)
Controls for article No Yes No Yes
Controls for country No Yes No Yes
Controls for year No Yes No Yes
# of observations 345 345 345 345
R2
0.174 0.253 0.214 0.615
Notes: Results correspond to the subsample of estimates on job flows.

Results
Short run
All ﬂows (raw) Article Time, country f.e. Worker ﬂows
Inequalities Job Creation
β 0.017*** 0.006 -0.001 1.099***
SE (0.007) (0.040) (0.008) (0.202)

Results
Short run
All flows (raw) Article Time, country f.e. Worker flows
Inequalities Job Creation
β 0.017*** 0.006 -0.001 1.099***
SE (0.007) (0.040) (0.008) (0.202)
Inequalities Job Destruction
β 0.144*** 0.361*** 0.151*** 0.456***
SE (0.021) (0.107) (0.030) (0.181)
Productivity Job Creation
β -0.003 -0.008 0.003 1.436***
SE (0.006) (0.020) (0.006) (0.327)
Productivity Job Destruction
β -0.069*** -0.196*** -0.050** -0.921***
SE (0.018) (0.057) (0.026) (0.202)
Notes: estimates for Worker flows come from the Life in Transition survey. ***,**
indicates significance at the 5% and 10 % level respectively.

Results
Robustness: links to inequality and produtivity in LiTS
Productivity Inequalities
(1) (2) (1) (2)
β 2.010*** 1.099*** 0.535 1.436***
Job SE (0.680) -0.202 (0.696) (0.327)
Creation N 18 192 19 240
R2 0.402 0.152 0.041 0.082
β 1.464*** 0.456*** -0.217 -0.921***
Job SE (0.667) -0.181 (0.549) (0.233)
Destruction N 18 192 19 240
R2 0.271 0.037 0.011 0.068
Notes:
in (1) the sample covers the same country-year periods than in the literature;
in (2) the sample covers all years and countries with available data.

Results
Links to inequalities: Long run
Job creation (left) and job destruction (right)
Hirings (left) and separation (right)

Results
Links to productivity: Long run
Job creation (left) and job destruction (right)
Hirings (left) and separation (right)

Conclusions
Conclusions
1 With respect to the literature
Estimates from the literature do not support simple stories of
transition
We cannot say we reject OST with this data – just that
together this evidence shows other than each separately

Conclusions
Conclusions
transition
2 With regards to productivity
We ﬁnd no evidence of creative destruction in the short run
Lack of clear long term eﬀects on productivity

Conclusions
Conclusions
transition
2 With regards to productivity
We find no evidence of creative destruction in the short run
Lack of clear long term effects on productivity
3 With regards to inequalities
Reallocation (JC & JD) positively connected to inequalities.
Long lasting effects mainly through JC

Conclusions
Comments or suggestions?

Appendix
Articles used in the meta-analysis I
Acquisti, A., Lehmann, H., 2000. Job creation and job destruction in the Russian
Federation. Trinity Economic Paper Series 1/00, Trinity College Dublin.
Bilsen, V., Konings, J., 1998. Job Creation, Job Destruction, and Growth of
Newly Established, Privatized, and State-Owned Enterprises in Transition
Economies: Survey Evidence from Bulgaria, Hungary, and Romania . Journal of
Comparative Economics 26 (3), 429 – 445.
Bojnec, S., Konings, J., 1998. Job Creation, Job Destruction and Labour
Demand in Slovenia (7498).
Brown, D. J., Earle, J. S., 2003. The reallocation of workers and jobs in Russian
industry. Economics of Transition 11 (2), 221–252.
Brown, J. D., Earle, J. S., 2002. Gross job ﬂows in Russian industry before and
after reforms: Has destruction become more creative? Journal of Comparative
Economics 30 (1), 96–133.
Brown, J. D., Earle, J. S., 2006. Job reallocation and productivity growth in the
Ukrainian transition. Comparative Economic Studies 48 (2), 229–251.

Appendix
Articles used in the meta-analysis II
Christev, A., Kupets, O., Lehmann, H., 2008. Trade liberalization and
employment effects in Ukraine. Comparative Economic Studies 50 (2), 318–340.
De Loecker, J., Konings, J., 2006. Job reallocation and productivity growth in a
post-socialist economy: Evidence from Slovenian manufacturing. European
Journal of Political Economy 22 (2), 388–408.
Faggio, G., Konings, J., 2003. Job creation, job destruction and employment
growth in transition countries in the 90s. Economic Systems 27 (2), 129–154.
Gimpelson, V., Kapeliushnikov, R., Lukiyanova, A., 2010. Stuck between surplus
and shortage: demand for skills in Russian industry. Labour 24 (3), 311–332.
Haltiwanger, J. C., Vodopivec, M., 2002. Gross worker and job flows in a
transition economy: an analysis of Estonia. Labour Economics 9 (5), 601–630.
Konings, J., Kupets, O., Lehmann, H., 2003. Gross job flows in Ukraine.
Economics of Transition 11 (2), 321–356.
Konings, J., Lehmann, H., Schaffer, M. E., 1996. Job creation and job
destruction in a transition economy: Ownership, firm size, and gross job flows in
Polish manufacturing 1988-91 3 (3), 299–317.

Appendix
Articles used in the meta-analysis III
Masso, J., Heshmati, A., 2004. The optimality and overuse of labour in Estonian
manufacturing enterprises. Economics of Transition 12 (4), 683–720.
Siebertova, Z., Senaj, M., 2007. Job creation and job destruction: Evidence from
the Slovak Republic 2000-2004. Ekonomicka T’asopis (Journal of Economics)
55 (2), 107–124.
Sorm, V., Terrell, K., 2000. Sectoral restructuring and labor mobility: A
comparative look at the Czech Republic . Journal of Comparative Economics
28 (3), 431 – 455.
Walsh, P. P., 2003. The cyclical pattern of regional unemployment ﬂows in
Poland. Economic Systems 27 (2), 155–169.
Warzynski, F., 2003. The causes and consequences of sector-level job ﬂows in
Poland. Economics of Transition 11 (2), 357–381.

Appendix
Estimates of mean ﬂows
Country
Job Flows Worker ﬂows
Job creation Job destruction Hirings Separations
Mean SD Mean SD Mean SD Mean SD
Bulgaria 4.62 9.54 6.90 3.54
Czech Republic 4.30 0.29 3.72 0.44
Estonia 12.95 22.76 8.87 5.10 26.95 26.43 22.70 10.27
Hungary 3.20 5.44 7.61 1.43
Poland 4.38 3.44 14.35 9.48 17.29 3.29 17.94 3.57
Romania 11.28 24.37 7.80 3.57
Russia 9.15 18.25 10.97 6.34 20.70 3.25 28.07 1.75
Slovenia 7.33 2.62 12.67 3.90
Slovakia 5.28 4.15 7.12 5.92
Ukraine 3.73 4.00 9.64 1.65
Overall 7.99 15.92 9.86 6.18 22.98 21.95 21.08 9.79
Notes: Mean
and standard deviations values of job creation and job destruction for each country, bootstraped with 1000
repetitions.

Appendix
Relation to the LiTS
Job creation Job destruction
Specification Coefficient test statistic Coefficient test statistic
Pairwise correlation 0.449*** 3.808 0.328*** 2.554
OLS - no controls 0.524*** 3.359 0.641*** 2.085
OLS - country f.e. 0.345*** 3.317 0.580 1.440
OLS - time f.e. 0.443*** 2.095 0.765*** 2.204
OLS - c. and t. f.e. 0.226 1.382 1.057 * 1.867

Appendix
Changes in productivity and inequalities
Figure: Productivity chain index (left) and Gini inequality index (right)

Productivity and Inequality Effects of Labor Reallocation Transition -- Insights from a A Meta-Analysis of Studies on Transition

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