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Labour Market Flexibility And Migration In The Baltic States: Macro Evidences

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  • Tiiu Paas
  • Raul Eamets
  • Jaan Masso
  • Marit Room

Abstract

The Eastern enlargement of the European Union and the requirements of the European Monetary Union call for increased flexibility of labour markets in both the current EU members and candidate countries. If labour markets and institutions are rigid in the monetary union, market disequilibrium is likely to grow. The present paper aims to give a macroeconomic overview of the Baltic States’ labour market in the period 1995?2001, laying emphasis on the issues of labour market flexibility and labour migration in the context of EU eastward enlargement. The Baltic States comprise a particular regional cluster and an interesting case for making generalizations about the processes of transition and EU eastward enlargement, and developing a new field of economics - the economics of transition and integration. In real terms, one has to admit, the influence of the Baltic economies on the EU eastward enlargement processes can hardly be significant, as the very small size of the Baltic markets bears no comparison with either the markets of the current EU member states (EU15) or the other candidate countries (CC). The Baltic States have dutifully observed the main international standards regulating labour relations in accordance with the EU rules. Comparing the Baltic States’ labour market with those of EU15 and the other candidate countries, one comes to the conclusion that the Baltic States’ labour markets are flexible. The most flexible among them is the Estonian labour market followed by that of Latvia. However, predictably, after joining the EU, the labour markets of the new members may become more rigid due to the increasing influence on them of institutions and trade unions, and due to more generous funding of labour market policies. Moreover, a decline of wage flexibility can be predicted. Free movement of labour as a natural consequence of EU enlargement will also exert pressure on the Baltic labour markets due to the possible migration of better-qualified and flexible labour force, and cross-border movement of labour within the Baltic Sea Region countries. Coupled with ageing of the population, it may increase shortage of skilled labour. Consequently, if labour mobility increases and labour market flexibility declines remarkably during the enlargement processes, market disequilibrium is likely to grow in the Baltic States as well.

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Paper provided by Faculty of Economics and Business Administration, University of Tartu (Estonia) in its series University of Tartu - Faculty of Economics and Business Administration Working Paper Series with number 16.

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Length: 101 pages
Date of creation: 2003
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Handle: RePEc:mtk:febawb:16

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  1. Blanchard, Olivier Jean & Aghion, Philippe, 1994. "On the Speed of Transition in Central Europe," Scholarly Articles 4481322, Harvard University Department of Economics.
  2. Boeri, Tito & Nicoletti, Giuseppe & Scarpetta, Stefano, 2000. "Regulation And Labour Market Performance," CEPR Discussion Papers 2420, C.E.P.R. Discussion Papers.
  3. Bauer, Thomas K. & Zimmermann, Klaus F., 1999. "Report No. 3: Assessment of Possible Migration Pressure and its Labour Market Impact Following EU Enlargement to Central and Eastern Europe," IZA Research Reports 3, Institute for the Study of Labor (IZA).
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  5. Martin, John P. & Grubb, David, 2001. "What works and for whom: a review of OECD countries' experiences with active labour market policies," Working Paper Series 2001:14, IFAU - Institute for Evaluation of Labour Market and Education Policy.
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  8. Paul Geroski & Paul Gregg & John van Reenen, 1995. "Market Imperfections and Employment," OECD Jobs Study Working Papers 5, OECD Publishing.
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Cited by:
  1. Masso, Jaan & Staehr, Karsten, 2005. "Inflation dynamics and nominal adjustment in the Baltic States," Research in International Business and Finance, Elsevier, vol. 19(2), pages 281-303, June.
  2. 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).
  3. Seppo Kari & Jouko Ylä-Liedenpohja, 2004. "Cost of Capital for Cross-Border Investment: The Fallacy of Estonia as a Tax Haven," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 5(1), pages 28-43, December.
  4. Raul Eamets, 2004. "Labour market flows and adjustment to macroeconomic shocks in the Baltic States," Post-Communist Economies, Taylor & Francis Journals, vol. 16(1), pages 47-71.
  5. Raul Eamets & Epp Kalaste, 2004. "The Lack of Wage Setting Power of Estonian Trade Unions?," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 5(1), pages 44-60, December.
  6. Månsson, Jonas & Olsson, Mikael, 2010. "Mobility sans integration? An analysis of labor market attainment in Sweden among its post-war immigrants from Estonia, Latvia, Lithuania and Poland," CAFO Working Papers 2010:6, Centre for Labour Market Policy Research (CAFO), School of Business and Economics, Linnaeus University.
  7. Tiiu Paas & Marit Hinnosaar & Jaan Masso & Orsolya Szirko, 2004. "Social Protection Systems In The Baltic States," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 26, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  8. Tiiu Paas, 2003. "Social Consequences of Transition and European Integration Processes in the Baltic States," ERSA conference papers ersa03p382, European Regional Science Association.
  9. Camilla Jensen, 2004. "Formal Integration: FDI and trade in Europe," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 5(1), pages 5-27, December.

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