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How Important Are Labor Market Institutions for Labor Market Performance in Transition Countries?

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Author Info

  • Lehmann, Hartmut

    ()
    (University of Bologna)

  • Muravyev, Alexander

    ()
    (St. Petersburg University GSOM and IZA)

Abstract

This paper offers a first comprehensive study of the relationship between labor market institutions and policies and labor market performance in the countries of Eastern Europe and Central Asia, which in the last two decades experienced radical economic and institutional transformations. Based on a new and unique hand-collected dataset, the paper first documents the evolution of labor market institutions and policies in the transition region. The data show a clear trend towards liberalization of labor markets, especially in the countries of the former Soviet Union, but also substantial differences across the countries studied. Second, the paper takes advantage of the large variation in the key economic and institutional variables to test several predictions concerning the role of institutions and polices in explaining labor market outcomes. The results of our econometric analysis are generally consistent with the view that institutions matter for labor market outcomes, and that deregulation of the labor markets improves their performance. The analysis also suggests several significant interactions between different institutions, which are in line with the idea of reform complementarity and broad reform packages. We also show that there are important advantages of focusing on a broader set of labor market outcomes, and not only on the unemployment rate, which until now has been the main approach in the empirical literature.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4673.

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Length: 50 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4673

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Related research

Keywords: unemployment; labor market institutions; transition economies;

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Citations

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Cited by:
  1. Hazans, Mihails, 2011. "What Explains Prevalence of Informal Employment in European Countries: The Role of Labor Institutions, Governance, Immigrants, and Growth," IZA Discussion Papers 5872, Institute for the Study of Labor (IZA).
  2. World Bank, 2011. "Challenges to Enterprise Performance in the Face of the Financial Crisis : Eastern Europe and Central Asia," World Bank Publications, The World Bank, number 2316, October.
  3. Martin Guzi, 2013. "An Empirical Analysis of Welfare Dependence in the Czech Republic," Discussion Papers 16, Central European Labour Studies Institute (CELSI).
  4. Zimmermann, Klaus F. & Biavaschi, Costanza & Eichhorst, Werner & Giulietti, Corrado & Kendzia, Michael J. & Muravyev, Alexander & Pieters, Janneke & Rodríguez-Planas, Núria & Schmidl, Ricarda, 2013. "Youth Unemployment and Vocational Training," Foundations and Trends(R) in Microeconomics, now publishers, vol. 9(1–2), pages 1-157, December.
    • Biavaschi, Costanza & Eichhorst, Werner & Giulietti, Corrado & Kendzia, Michael J. & Muravyev, Alexander & Pieters, Janneke & Rodríguez-Planas, Núria & Schmidl, Ricarda & Zimmermann, Klaus F., 2012. "Youth Unemployment and Vocational Training," IZA Discussion Papers 6890, Institute for the Study of Labor (IZA).
  5. Juan Carlos Cuestas & Luis A. Gil-Alana & Karl Taylor, 2012. "Inflation convergence in Central and Eastern Europe with a view to adopting the euro," Working Papers 12-01, Asociación Española de Economía y Finanzas Internacionales.
  6. Fialova, Kamila & Schneider, Ondrej, 2011. "Labor institutions and their impact on shadow economies in Europe," Policy Research Working Paper Series 5913, The World Bank.
  7. Jens Holscher & Cristiano Perugini & Fabrizio Pompei, 2011. "Wage inequality, labour market flexibility and duality in Eastern and Western Europe," Post-Communist Economies, Taylor & Francis Journals, vol. 23(3), pages 271-310.
  8. H. Lehmann & A. Muravyev, 2010. "Labor market institutions and labor market performance: what can we learn from transition countries?," Working Papers 714, Dipartimento Scienze Economiche, Universita' di Bologna.
  9. Louis Jaeck & Sehjeong Kim, 2014. "The Impact of EMU Enlargement on Structural Reforms: A Political Economy Approach," International Advances in Economic Research, Springer, vol. 20(1), pages 73-86, February.
  10. Anna Lukiyanova, 2011. "Effects of Minimum Wages on the Russian Wage Distribution," HSE Working papers WP BRP 09/EC/2011, National Research University Higher School of Economics.

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