Job Reallocation and Productivity Growth in the Ukranian Transition

We analyze the pace and patterns of job reallocation in Ukraine using 1992-2000 panel data on nearly the surviving universe of manufacturing firms inherited from the Soviet Union. Employment growth displays substantial increase in heterogeneity during this transition period, with a corresponding rise in excess job reallocation. Unlike data for Soviet Russia in the 1980s, Ukrainian job reallocation in the 1990s was clearly productivity-enhancing, both within and across industries. The paper also estimates the effects of firm and market characteristics on the magnitude of reallocation and on the extent to which it has contributed to aggregate productivity growth. Journal of Economic Literature Classification Numbers: E24, J63, O47, P23. The first version of this paper was prepared for the IZA-WDI Conference on Labor Markets in Emerging Market Economies, Costa Rica, April 2002; it was revised for the Institute for Economic Research’s Conference on Labour Market Reforms and Economic Growth, Kiev, March 2004. Data collection was supported by a grant from EROC (Economic Research and Outreach Center) at the Kiev School of Economics. This paper is part of a larger project funded by the National Council for Eurasian and East European Research on employment reallocation in Hungary, Romania, Russia, and Ukraine, and the U.S. State Department (through a grant administered by the William Davidson Institute at the University of Michigan Business School) for support of analysis. We thank Natalia Akhmina, Serhiy Biletsky, Larisa Leshchenko, Ivan Maryanchuk, and Alexander Scherbakov for help in obtaining and understanding the data, and Dietrich Earnhart and John Haltiwanger for comments.