Institutional barriers and job creation in Central and Eastern Europe

Crespo Cuaresma, Jesus ORCID: and Oberhofer, Harald and Vincelette, Gallina Andronova (2014) Institutional barriers and job creation in Central and Eastern Europe. IZA Journal of European Labor Studies, 3 (3). pp. 1-29. ISSN 2193-9012


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Using information from the Amadeus dataset and the Business Environment and Enterprise Performance Survey, we provide an empirical investigation of the industry and firm-specific determinants of the intensive margin (i.e., within existing firms) job creation process in eleven Central and Eastern European economies during the period 2002-2009. Our results indicate that during the years prior to the global financial crisis, traditional industries were crucial for the net intensive margin creation of jobs in the region but, by contrast, services firms were less vulnerable to the economic downturn. At the firm level, small and young already existing firms and subsidiaries of multinational corporate groups tended to register the highest employment growth rates. The empirical results also indicate that more productive surviving firms tended to be less vulnerable to the economic downturns in terms of employment change. The perceived quality of the business climate by enterprises of the region is robustly correlated with intensive margin employment growth both before and during the recent global financial crisis. Interestingly, the best performing surviving firms are estimated to be most negatively affected by a poor business environment. Institutional barriers thus appear as an important factor hampering firm growth in Central and Eastern Europe. These findings hold for the group of high-growth surviving firms (gazelles) that disproportionately accounted for the creation of new jobs in these economies.

Item Type: Article
Additional Information: We would like to thank Martin Kahanec, two anonymous referees, Omar Arias, Alex Coad, Xavier Devictor, Doerte Doemeland, Hongjoo J. Hahm, Satu Kahkonen, Ismail Radwan, Carolina Sanchez-Paramo, Erwin H. R. Tiongson, and Charles Udomsaph for very helpful comments on earlier drafts of this paper. An earlier version of parts of this work appeared in the EU11 Regular Economic Report issue 27 (June), World Bank 2013 and was published as Policy Research Working Paper 6533 by The World Bank (Oberhofer, H. and Vincelette, G. A, (2013) Determinants of job creation in eleven new EU member states - evidence from firm level data, Policy Research Working Paper Series 6533, World Bank). This article is published under license to BioMed Central Ltd. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. The online version of this article (doi:10.1186/2193-9012-3-3) contains supplementary material, which is available to authorized users.
Keywords: firm growth / institutional barriers / Central and Eastern Europe
Classification Codes: JEL L16; L21; L25; L51; L53
Divisions: Departments > Volkswirtschaft > Makroökonomie
Forschungsinstitute > Human Capital and Development
Kompetenzzentren > Sustainability Transf. & Responsibility
Version of the Document: Published
Variance from Published Version: None
Depositing User: Elena Simukovic
Date Deposited: 18 Aug 2016 13:00
Last Modified: 02 Dec 2019 09:24
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