Enterprise Defensive Restructuring: Cross-country Evidence within Transitional Settings

This paper considers findings from a panel of Croatian and Slovenian firms throughout the period 1995–2000. Scrutiny of Croatia and Slovenia sheds light on regional issues, owing to their small size and their being part of the same country until the early 1990s. More particularly, the issues of defensive and strategic restructuring are addressed through dynamic labour demand analysis. The estimated short run elasticities of labour with respect to wages and output are very similar for the two countries and confirm that firms in both economies adjusted employment gradually over time in response to exogenous shocks occurring at the beginning of transition. However, long-run wage elasticities are greater for Slovenian firms, suggesting that deeper and more efficient strategic restructuring in Slovenia was a significant factor in the differing economic performances of the two countries in the first decade of transition.