Job creation and job destruction in economic crisis at firm level: the case of Greek manufacturing sectors

The current European economic crisis changes radically the structure of present and future employment, the political agenda and the adoption of appropriate economic policy means in the whole Europe. This is mostly true for southern European countries that were hit hard by economic crisis and thus raising questions about the appropriate policy mix required in supporting employment. In Greece, for example, the problem of unprecedented large unemployment (27 %) by summer 2013, is an urgent issue dominating in all current discussions related to adoption of the best economic policy means. Often, these discussions are focused on some general macroeconomic policy suggestions that are not based on a microeconomic analysis of how firms are affected by economic crisis, not only, in the same sector, but also, in different sectors of the economy. In this study, we explore the determinants of job creation and job destruction using a large and comprehensive panel data set of Greek manufacturing firms, covering the time period 2004 – 2011 and distinguishing between the pre-crisis (2004–2007) and post-crisis (2008–2011) period. Our study reveals that, although the crisis has indeed a substantial negative effect on employment growth in all sectors of Greek manufacturing, some sectors (such as food products) are less affected compared to others (especially textiles, wearing apparel and leather products). Thus, our results suggest that a discretionary microeconomic policy that could encourage production and exports, with such measures as tax reductions, investment subsidies, export grants, etc., in favour of the less affected sectors could contribute to reducing large unemployment.