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Unemployment insurance in Algeria : implications for a labor market in transition

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  • Ruppert, Elizabeth

Abstract

To predict how Algeria's unemployment crisis will evolve, the author evaluates the Algerian unemployment insurance system's ability to finance itself, to affect employment decisions, and promote enterprise restructuring. The main conclusion is that industrial restructuring has serious and persistent implications for the labor market. In an environment where many equilibria are possible, there is a real danger of reaching a high unemployment equilibrium. The big-bang experience of structural adjustment in Central and Eastern Europe transition economies resulted in large-scale unemployment. Despite considerable restructuring progress, structural rigidities still exist in the labor market, and long-term unemployment has persisted. One advantage of the big-bang approach is adjustment speed, but the resulting unemployment may be too costly for Algeria's economy, especially if it persists. A more modern mixed bang approach would incorporate active employment measures to mitigate entrenched unemployment. The policies will maintain or enhance human capital through work, so idle workers don't lose their skills. Flex-time arrangements would help workers maintain an attachment to the labor force. However minor, such work would help workers avoid the traps of long-term unemployment. Two striking conclusions emerge from the Central and Eastern European experience: a) unemployment is not essential to enterprise restructuring and labor market adjustment;and b) growing long-term unemployment is self-fulfilling and results in higher and persistence unemployment. Although active employment measures are costly and have relatively low rates of return in the short run, they can be marginally effective as part of a long-term strategy.

Suggested Citation

  • Ruppert, Elizabeth, 1996. "Unemployment insurance in Algeria : implications for a labor market in transition," Policy Research Working Paper Series 1659, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1659
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    References listed on IDEAS

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    1. Commander, Simon & Yemtsov, Ruslan, 1995. "Russian unemployment : its magnitude, characteristics, and regional dimensions," Policy Research Working Paper Series 1426, The World Bank.
    2. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
    3. Hamermesh, Daniel S., 1992. "Unemployment insurance for developing countries," Policy Research Working Paper Series 897, The World Bank.
    4. Lehmann,Hartmut, 1995. "Active labor market policies in the OECD and in selected transition economies," Policy Research Working Paper Series 1502, The World Bank.
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    Cited by:

    1. Mazza, Jacqueline, 2000. "Unemployment Insurance: Case Studies and Lessons for Latin America and the Caribbean," IDB Publications (Working Papers) 1311, Inter-American Development Bank.

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