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Labor Market Institutions and Unemployment Dynamics in Transition Economies

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  • Pietro Garibaldi
  • Zuzana Brixiova

Abstract

This paper studies interactions between labor market institutions and unemployment dynamics in transition economies. It presents a dynamic matching model in which state sector firms endogenously shed labor and private job creation takes time. Two main conclusions arises. First, higher unemployment benefits increase steady-state unemployment, and, during the transition, they reduce the fall in real wages and speed up closure of state enterprises. Second, higher minimum wages can theoretically speed up the elimination of state sector jobs without affecting steady-state unemployment. These results are broadly consistent with existing evidence on the dynamics of unemployment and real wages in transition economies.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 97/137.

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Length: 46
Date of creation: 01 Oct 1997
Date of revision:
Handle: RePEc:imf:imfwpa:97/137

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Cited by:
  1. Boeri, Tito, 2001. "Transition with Labour Supply," IZA Discussion Papers 257, Institute for the Study of Labor (IZA).
  2. 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.
  3. Lamo, Ana & Messina, Julián & Wasmer, Etienne, 2010. "Are Specific Skills an Obstacle to Labor Market Adjustment?," IZA Discussion Papers 5250, Institute for the Study of Labor (IZA).
  4. 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.
  5. 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.
  6. Ariane Tichit Miniscloux & Solenne Tanguy, 2012. "Initial reforms and dynamics of transition," Working Papers halshs-00687532, HAL.
  7. Tichit, Ariane, 2006. "The optimal speed of transition revisited," European Journal of Political Economy, Elsevier, vol. 22(2), pages 349-369, June.
  8. 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.
  9. Hubert Gabrisch & Herbert Buscher, 2005. "The unemployment-growth relationship in transition countries," IWH Discussion Papers 5, Halle Institute for Economic Research.
  10. 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.
  11. 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.
  12. World Bank, 2012. "Resilience, Equity, and Opportunity," World Bank Other Operational Studies 12648, The World Bank.
  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. 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. Jan J. Rutkowski & Stefano Scarpetta, 2005. "Enhancing Job Opportunities : Eastern Europe and the Former Soviet Union," World Bank Publications, The World Bank, number 7408, October.
  16. 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.

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