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Labor Market Institutions and Unemployment Dynamics in Transition Economies

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  • 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.

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal Staff Papers - International Monetary Fund.

Volume (Year): 45 (1998)
Issue (Month): 2 (June)
Pages: 269-308

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Handle: RePEc:pal:imfstp:v:45:y:1998:i:2:p:269-308

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Cited by:
  1. 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.
  2. Tito Boeri & Katherine Terrell, 2001. "Institutional Determinants of Labor Reallocation in Transition," William Davidson Institute Working Papers Series 384, William Davidson Institute at the University of Michigan.
  3. 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.
  4. 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.
  5. Tito Boeri, 1999. "Transition with Labour Supply," William Davidson Institute Working Papers Series 274, William Davidson Institute at the University of Michigan.
  6. 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 67609, The World Bank.
  7. Ana Lamo & Julian Messina & Etienne Wasmer, 2006. "Are Specific Skills an Obstacle to Labor Market Adjustment? Theory and an Application to the EU Enlargement," Sciences Po publications 585, Sciences Po.
  8. World Bank, 2012. "Resilience, Equity, and Opportunity," World Bank Other Operational Studies 12648, The World Bank.
  9. 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.
  10. Andreas Wörgötter & Jiri Vecernik, 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.
  11. 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.
  12. Jan J. Rutkowski & Stefano Scarpetta, 2005. "Enhancing Job Opportunities : Eastern Europe and the Former Soviet Union," World Bank Publications, The World Bank, number 7408, January.
  13. Tichit, Ariane, 2006. "The optimal speed of transition revisited," European Journal of Political Economy, Elsevier, vol. 22(2), pages 349-369, June.
  14. 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.
  15. Hubert Gabrisch & Herbert Buscher, 2005. "The unemployment-growth relationship in transition countries," IWH Discussion Papers 5, Halle Institute for Economic Research.

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