Labour Market Reforms and Outcomes in Estonia
AbstractThe unemployment rate in Estonia rose sharply in 2010 to one of the highest levels in the EU, after the country entered a severe recession in 2008. While the rate declined relatively rapidly in 2011, it remained high especially for the less educated. In 2009, the Employment Contract Law relaxed employment protection legislation and sought to raise income protection of the unemployed to facilitate transition from less to more productive jobs while mitigating social costs. Utilizing a search model, this paper shows that increasing further labour market flexibility through reducing the tax wedge on labour would facilitate the structural transformation and reduce the long-term unemployment rate. Linking increases in unemployment benefits to participation in job search or training programmes would improve the unemployed workers’ incentives to search for jobs or retrain and the medium term labour market outcomes. Social protection schemes for the unemployed should be also strengthened as initially intended to give the unemployed sufficient time to search for adequate jobs or retrain for new opportunities.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3756.
Date of creation: 2012
Date of revision:
labour market reforms; search model; Estonia; OECD countries;
Other versions of this item:
- Zuzana Brixiova & Balázs Égert, 2012. "Labour Market Reforms and Outcomes in Estonia," EconomiX Working Papers 2012-16, University of Paris West - Nanterre la Défense, EconomiX.
- Zuzana Brixiova & Balazs Egert, 2012. "Labour Market Reforms And Outcomes In Estonia," William Davidson Institute Working Papers Series wp1027, William Davidson Institute at the University of Michigan.
- Brixiova, Zuzana & Égert, Balázs, 2012. "Labour Market Reforms and Outcomes in Estonia," IZA Discussion Papers 6336, Institute for the Study of Labor (IZA).
- J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
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