Job Creation, Job Destruction and Labour Demand in Slovenia

Abstract

This paper uses firm level data of traditional and newly established private enterprises to investigate gross job flows and labour demand in the transition period in Slovenia. We find that job destruction dominates job creation in the early years of transition, but later in the transition job destruction diminishes. The excess job reallocation rate, a measure for restructuring, is found to be rather low. In addition, we compare the results with similar studies for Romania, Bulgaria and Hungary and find that the gross job flows in Slovenia are similar to those of Hungary, yet the job destruction rate is in general lower.

We find that newly established private firms or de novo firms are fundamentally the most dynamic ones in terms of job creation. We estimate a reduced labour demand equation controlling for ownership and competitive pressure and find that the estimated employment elasticity with respect to real sales is rather low, 12%. We do not find any difference in this elasticity if we split the sample in expanding versus contracting firms. Furthermore we cannot find evidence that competitive pressure has any impact on the demand for labour. We do find that de novo firms have a higher employment growth than traditional firms.