Hidden Unemployment and Macroeconomic Shocks in Estonia (1997-2000): Empirical Evidence from Russian Financial Crises

The aim of this article is to analyse two components of hidden unemployment in Estonia – underemployment and discouraged persons in 1997-2000. This is important for giving an adequate overview of the situation on the labour market in Estonia and the scope of hidden unemployment and its development in the period where strong macroeconomic shocks influenced the economy. The following tasks are set for achieving this purpose – to estimate two components of hidden unemployment and to analyse the factors that influence them. In the analysis the models are created for 1997 (the year before crises) and for 2000 (the strongest effect of the crises on the labour market) and respective Estonian Labour Force Surveys (ELFS97 and ELFS00) are used. The most important findings were that the steady growth of discouragement seems to have no connection with the crisis in Russia. No connection with the economic decline can be also seen in patterns of underemployment, where the number of underemployed has been decreased significantly. So, the crisis has increased only the open unemployment level. There are no general factors found, what would influence all observed categories in year before crisis and in year 2000 where the open unemployment was the highest. There are factors found that increase the discouragement and unemployment in both years – dismissals, sex, being without work for a long time. There have been found very few labour supply side factors that are influencing the underemployment.