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Labour markets in Poland and Hungary five years from the start of transition: Evidence from monthly data

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  • Brauer, Holger
  • Falk, Martin
  • Raiser, Martin

Abstract

This paper presents error correction estimates of a simple interdependent model of the labour market using monthly data over 1990-1994 for the industrial sector in Poland and Hungary. The aim is to investigate three issues in the performance of labour markets during transition. First, is there a stable labour market equilibrium or do high unemployment rates across the region indicate hysteresis? Second, has the intensity of employment adjustment increased with progress in institutional reforms that strengthened corporate governance at the enterprise level? Third, what governs the evolution of real wages and to what extent is there evidence for strong insider power in the labour market? The results reveal striking differences between Poland and Hungary. The former exhibits hysteresis and evidence for considerable insider power while the latter has experienced adjustment towards a stable labour market equilibrium. The intensity of adjustment, however, is high in both countries over the sample period and fails to respond to the initiation of institutional reforms.

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 742.

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Date of creation: 1996
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Handle: RePEc:kie:kieliw:742

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Related research

Keywords: Hysteresis; Adjustment Intensity; Insider Power;

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References

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  1. Franz, Wolfgang, 1995. "Central and East European Labour Markets in Transition: Developments, Causes, and Cures," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1132, C.E.P.R. Discussion Papers.
  2. S Estrin & P Hare & M Suranyi, 1992. "Banking in Transition: Development and Current Problems in Hungary," CEP Discussion Papers, Centre for Economic Performance, LSE dp0068, Centre for Economic Performance, LSE.
  3. Begg, David & Portes, Richard, 1992. "Enterprise Debt and Economic Transformation: Financial Restructuring of the State Sector in Central and Eastern Europe," CEPR Discussion Papers, C.E.P.R. Discussion Papers 695, C.E.P.R. Discussion Papers.
  4. Lane Timothy D., 1994. "Wage Controls and Employment in Economies in Transition," Journal of Comparative Economics, Elsevier, vol. 19(2), pages 171-187, October.
  5. Bean, Charles R, 1994. "European Unemployment: A Survey," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 32(2), pages 573-619, June.
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  7. Josef C. Brada, 1990. "Introduction," Eastern European Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 28(4), pages 3-6, July.
  8. Long, Ngo Van & Siebert, Horst, 1991. "A model of the socialist firm in transition to a market economy," Kiel Working Papers 479, Kiel Institute for the World Economy.
  9. Szekely,Istvan & Newbery,David M. G., 1993. "Hungary: An Economy in Transition," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521440189.
  10. Hare, Paul G & Hughes, Gordon, 1991. "Competitiveness and Industrial Restructuring in Czechoslovakia, Hungary and Poland," CEPR Discussion Papers, C.E.P.R. Discussion Papers 543, C.E.P.R. Discussion Papers.
  11. Michael Burda & Michael Funke, 1993. "German trade unions after unification — Third degree wage discriminating monopolists?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 129(3), pages 537-560, September.
  12. Holger Schmieding, 1993. "From plan to market: On the nature of the transformation crisis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 129(2), pages 216-253, June.
  13. Jeroen J.M. Kremers & Neil R. Ericsson & Juan J. Dolado, 1992. "The power of cointegration tests," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 431, Board of Governors of the Federal Reserve System (U.S.).
  14. Lindbeck, Assar & Snower, Dennis J., 1986. "Efficiency Wages Versus Insiders and Outsiders," CEPR Discussion Papers, C.E.P.R. Discussion Papers 133, C.E.P.R. Discussion Papers.
  15. Heinrich, Ralph P., 1993. "Microeconomic adjustment in Hungary: Results from a survey of enterprises," Kiel Working Papers 599, Kiel Institute for the World Economy.
  16. J. P. Bonin & M. E. Schaffer, 1995. "Banks, firms, bad debts and bankruptcy in Hungary 1991-4," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 20764, London School of Economics and Political Science, LSE Library.
  17. Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198288107, October.
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Cited by:
  1. Gerling, Katja, 1998. "Transfers and transition: The impact of government support on factor demand and production in Eastern Germany," Kiel Working Papers 878, Kiel Institute for the World Economy.

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