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Labor Market Institutions and Unemployment Dynamics in Transition Economies

Author

Listed:
  • Pietro Garibaldi

    (International Monetary Fund)

  • Zuzana Brixiova

    (International Monetary Fund)

Abstract

The paper proposes and solves a matching model of job reallocation between the public and the private sector, and it shows that cross-country differences in labor market institutions are broadly consistent with the dynamics of unemployment and real wages in transition economies. Two main results arise from the analysis. First, higher unemployment benefits speed up job destruction in the state sector and private job creation at the early stages of the transition, but they increase unemployment in the long run. Second, higher minimum wages can theoretically speed up the reallocation process without affecting the long run equilibrium.

Suggested Citation

  • Pietro Garibaldi & Zuzana Brixiova, 1998. "Labor Market Institutions and Unemployment Dynamics in Transition Economies," IMF Staff Papers, Palgrave Macmillan, vol. 45(2), pages 269-308, June.
    • Handle: RePEc:pal:imfstp:v:45:y:1998:i:2:p:269-308
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    Cited by:

    1. Miguel A. León‐Ledesma & Peter McAdam, 2004. "Unemployment, Hysteresis And Transition," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(3), pages 377-401, August.
    2. Jiri Vecernik & Andreas Wörgötter, 1999. "Arbeitsmarktpolitik in Ost-Mitteleuropa," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 25(4), pages 497-508.
    3. Sumon Kumar Bhaumik & Richard Frensch & Stephan Huber, 2021. "Political economy of labor market institutions in a globalised era," Working Papers 391, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    4. Lamo, Ana & Wasmer, Etienne & Messina, Julián, 2006. "Are Specific Skills an Obstacle to Labour Market Adjustment? Theory and an Application to the EU Enlargement," CEPR Discussion Papers 5503, C.E.P.R. Discussion Papers.
    5. Irena Grosfeld & Claudia Senik-Leygonie & Thierry Verdier & Stanislav Kolenikov & Elena Paltseva, 1999. "Dynamism and Inertia on the Russian Labour Market: A Model of Segmentation," William Davidson Institute Working Papers Series 246, William Davidson Institute at the University of Michigan.
    6. Ariane TICHIT & Solenne TANGUY, 2012. "Initial reforms and dynamics of transition," Working Papers 201215, CERDI.
    7. Alderman, Harold & Yemtsov, Ruslan, 2012. "Productive role of safety nets : background paper for the World Bank 2012-2022 social protection and labor strategy," Social Protection Discussion Papers and Notes 67609, The World Bank.
    8. Tito Boeri & Katherine Terrell, 2002. "Institutional Determinants of Labor Reallocation in Transition," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 51-76, Winter.
    9. Lamo, Ana & Messina, Julián & Wasmer, Etienne, 2011. "Are specific skills an obstacle to labor market adjustment?," Labour Economics, Elsevier, vol. 18(2), pages 240-256, April.
    10. Sergey Kapelyuk, 2015. "The effect of minimum wage on poverty," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 23(2), pages 389-423, April.
    11. Tyrowicz, Joanna & van der Velde, Lucas, 2018. "Labor reallocation and demographics," Journal of Comparative Economics, Elsevier, vol. 46(1), pages 381-412.
    12. Jarkko Turunen, 2004. "Leaving state sector employment in Russia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(1), pages 129-152, March.
    13. Maxim Bouev, 2001. "Labor Supply, Informal Economy and Russian Transition," William Davidson Institute Working Papers Series 408, William Davidson Institute at the University of Michigan.
    14. Tito Boeri, 1999. "Transition with Labour Supply," William Davidson Institute Working Papers Series 274, William Davidson Institute at the University of Michigan.
    15. Jan J. Rutkowski & Stefano Scarpetta, 2005. "Enhancing Job Opportunities : Eastern Europe and the Former Soviet Union," World Bank Publications - Books, The World Bank Group, number 7408.
    16. Tichit, Ariane, 2006. "The optimal speed of transition revisited," European Journal of Political Economy, Elsevier, vol. 22(2), pages 349-369, June.
    17. Cuestas, Juan C. & Gil-Alana, Luis A. & Staehr, Karsten, 2011. "A further investigation of unemployment persistence in European transition economies," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 514-532.
    18. Joanna Tyrowicz & Lucas van der Velde, 2014. "Can We Really Explain Worker Flows in Transition Economies?," Working Papers 2014-28, Faculty of Economic Sciences, University of Warsaw.
    19. Randolph Luca Bruno, 2003. "Speed of Transition, Unemployment Dynamics and Nonemployment Policies: Evidence from the Visegrad Countries," LEM Papers Series 2003/23, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    20. World Bank, 2012. "Resilience, Equity, and Opportunity [Capacidad de recuperación, equidad y oportunidades]," World Bank Publications - Reports 12648, The World Bank Group.
    21. Maxim Bouev, 2004. "Diverging Paths: Transition in the Presence of the Informal Sector," William Davidson Institute Working Papers Series 2004-689, William Davidson Institute at the University of Michigan.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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