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Labour Market and Labour Market Policies During the Great Recession: The Case of Estonia

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  • Eamets, Raul

    ()
    (University of Tartu)

Abstract

The purpose of the paper is to analyse how labour market and labour market institutions reacted during recent crises. In early 1990s Estonia introduced a set of rather unique policy options like currency board as a ground for monetary policy, low taxes, open foreign trade policy, low public sector debts, annually balanced state budget etc. These measures caused very limited options to implement both monetary and fiscal policy. Macroeconomic adjustment will take place in such situation through the labour market. In the case of Estonia, we can observe a very high labour market flexibility, which played a crucial role in recent economic recession. The measures taken included a reduction of nominal wages, working hours and redundancies among employees. This indicates that the traditional institutional factors that protect workers and also could decrease the flexibility of the labour market, such as labour market regulation, social protection and union activities, are not very well developed in Estonia and do not have a significant effect on the outcomes of the labour market. The labour market reform was launched in Estonia in 2009. The main idea of the New Employment contract was that the termination of employment relations became less expensive for employers. Although empirical evidence show that the Employment Contracts Act entered into force at a time when most lay-offs had already been effected.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Policy Papers with number 60.

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Length: 31 pages
Date of creation: May 2013
Date of revision:
Handle: RePEc:iza:izapps:pp60

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Keywords: labour policy; Estonian labour market; labour market flexibility; labour market and recession;

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References

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  1. Sandrine Cazes & Alena Nesporova, 2004. "Labour markets in transition: balancing flexibility and security in Central and Eastern Europe," Revue de l'OFCE, Presses de Sciences-Po, vol. 91(5), pages 23-54.
  2. Ian Babetskii, 2006. "Aggregate Wage Flexibility in Selected New EU Member States," Working Papers 2006/1, Czech National Bank, Research Department.
  3. 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.
  4. Rainer Kattel & Ringa Raudla, 2012. "Austerity that Never Was? The Baltic States and the Crisis," Economics Policy Note Archive 12-05, Levy Economics Institute, The.
  5. Eamets, Raul & Masso, Jaan, 2004. "Labour Market Flexibility and Employment Protection Regulation in the Baltic States," IZA Discussion Papers 1147, Institute for the Study of Labor (IZA).
  6. Anne Lauringson, 2011. "Disincentive effects of unemployment insurance benefits: maximum benefit duration versus benefit level," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 11(1), pages 25-50, July.
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Cited by:
  1. Christine Erhel & Charlotte Levionnois, 2013. "Labour Market Policies in Times of Crisis: A Comparison of the 1992-1993 and 2008-2010 Recessions," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00880933, HAL.

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