owned firms. We include a dummy variable to control for firms that generate more than 10% of their sales from exports and another variable to control for foreign ownership defined as 10% or more share in firm ownership. Firms with government ownership might also grow at different rates because their objectives might differ from a completely private owned firm. To control for this factor, we include a dummy variable defined as 10% or more share in the ownership<sup>10</sup> . In addition to these firm characteristics, we control for 2‐digit industry and the region fixed effects.

The specification used in the regression analysis is given in equation 1. Annual growth rate of full‐time employment of firm _i_ at between _t_ and _t‐3_ (between 2007 and 2004) is represented by git. Smallit‐3, Mediumit‐3, and Largeit‐3 stand for the indicators for firm size in 2004 which are obtained from the survey<sup>11</sup> . The omitted group is micro firms. Ageit‐3 is the age of the firm in 2004. Exportit, Foreignit, and Govtit are the other firm level control variables which are only available in 2007. However, in the regressions for the panel data we use the values of the control variables directly from 2005 survey. Similarly the size groups for panel data are constructed from the 2005 survey. Finally Industryt and Regiont control for the 2‐digit industry and the region of the firm. In all regression analyses performed in this study, probability weights are used in order to get results that are representative for all firms in Turkey. All standard errors are clustered to allow for possible correlations in growth rates across firms within the same industry and region,

- ��� ��� ������������ ������������� ������������ ���������� ����������� �

- ����������� ��������� ����������� ��������� �ε�� . (1)

The regression results are given in Table 7. All regression results show that micro firms are the fastest growing group and growth rate decreases as size increases. However the decrease is not monotonic. Medium size firms are the least growing group in both regressions. As expected, younger firms grow faster than old firms.

# **4. Comparison with Other Countries in the Region**

In this section, we compare firms in Turkey with firms from several other countries in ECA region. The survey that was implemented in Turkey in 2008 was also implemented to other countries in the region which makes it possible to make cross‐country comparisons. A list of these countries is given in Table 18. Among these countries, we compare firm growth in Turkey with Russia, Ukraine, Poland, Romania, EU‐8, EU‐10, and “All ECA” region combined. Table 8 shows the proportion of firms in each size‐age group for each country. The values in the total row and total column in each table show the total number of firms in each cell incorporating the probability weights in the calculations. Hence the tables are representative of the firm population in each country. There are three age groups: 1‐5 years, 6‐15 years, and ≥ 16 years and four size groups as described before. All size and age groups are constructed using the 2004 values.

> 10 The firms that are 100% government owned are excluded from the survey.

> 11 The survey included questions asking the levels of employment and sales for last fiscal year and three fiscal years before.

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