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Labor market developments during economic transition

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  • Rutkowski, Jan
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    Abstract

    The paper reviews labor market developments in the transition economies of Europe and Central Asia. It argues that the scarcity of productive job opportunities and the growing labor market segmentation are the two main labor market problems facing the transition economies. In the European transition economies thelack of jobs has led to persistent open unemployment. In the Commonwealth of Independent States (CIS) it has led to hidden unemployment (underemployment and low productivity employment). Unemployment in the European transition economies is supported by the developed social safety net. In contrast, in the CIS for most workers unemployment is not an affordable option. They either stick to their old, unproductive jobs in unrestructured enterprises, or work in the informal sector, or resort to subsistence agriculture. Thus, underemployment in the CIS is a mirror image of unemployment in the European transition economies. Accordingly, the high employment-to-population ratios in many CIS countries do not necessarily signify favorable labor market performance. Instead they often indicate delayed enterprise restructuring, the maintenance of unsustainable jobs in uncompetitive firms, and the existence of a large informal sector as an employer of last resort. Labor market segmentation has been caused by a sharp increase in earnings differentials and the attendant increase in the incidence of low-paid jobs, by the polarization of regional labor market conditions, and finally by the growth of the informal sector offering casual, low-productivity jobs. Labor market segmentation and accompanying inequalities are more pronounced in the CIS than in the European transition economies.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3894.

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    Date of creation: 01 Apr 2006
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    Handle: RePEc:wbk:wbrwps:3894

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    Keywords: Labor Markets; Labor Standards; Labor Management and Relations; Educational Policy and Planning; Work&Working Conditions;

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    1. Fleisher, Belton M. & Peter, Klara Sabirianova & Wang, Xiaojun, 2004. "Returns to Skills and the Speed of Reforms: Evidence from Central and Eastern Europe, China, and Russia," IZA Discussion Papers 1182, Institute for the Study of Labor (IZA).
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    9. repec:iza:izadps:dp893 is not listed on IDEAS
    10. Fabian Bornhorst & Simon Commander, 2006. "Regional unemployment and its persistence in transition countries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 14(2), pages 269-288, 04.
    11. Rutkowski, Jan, 2003. "Rapid labor reallocation with a stagnant unemployment pool : the puzzle of the labor market in Lithuania," Policy Research Working Paper Series 2946, The World Bank.
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    13. Rutkowski, Jan, 2003. "Why is unemployment so high in Bulgaria?," Policy Research Working Paper Series 3017, The World Bank.
    14. Klara Sabirianova Peter, 2003. "Skill-Biased Transition: The Role of Markets, Institutions, and Technological Change," William Davidson Institute Working Papers Series 2003-616, William Davidson Institute at the University of Michigan.
    15. Rutkowski, Jan J., 2001. "Earnings inequality in transition economies of Central Europetrends and patterns during the 1990s," Social Protection Discussion Papers 23306, The World Bank.
    16. World Bank, 2003. "The Russian Labor Market : Moving from Crisis to Recovery," World Bank Publications, The World Bank, number 15007, October.
    17. Rutkowski, Jan J., 1999. "Labor markets and poverty in Bulgaria," Social Protection Discussion Papers 20817, The World Bank.
    18. Michelle Riboud & Carolina Sánchez-Páramo & Carlos Silva-Jáuregui, 2002. "Does Eurosclerosis Matter? Institutional Reform and Labor Market Performance in Central and Eastern Europe," World Bank Publications, The World Bank, number 14093, October.
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    22. Rutkowski, Jan, 2003. "Does strict employment protection discourage job creation? Evidence from Croatia," Policy Research Working Paper Series 3104, The World Bank.
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    Citations

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    Cited by:
    1. Niall O’Higgins, 2010. "Youth Labour Markets in Europe and Central Asia," Working Papers id:2740, eSocialSciences.
    2. Linz, Susan J. & Semykina, Anastasia, 2008. "How do workers fare during transition? Perceptions of job insecurity among Russian workers, 1995-2004," Labour Economics, Elsevier, vol. 15(3), pages 442-458, June.
    3. Linz, Susan J. & Luke Chu, Yu-Wei, 2013. "Work ethic in formerly socialist economies," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 185-203.
    4. Arabsheibani, Reza & Mussurov, Altay, 2006. "Returns to Schooling in Kazakhstan: OLS and Instrumental Variables Approach," IZA Discussion Papers 2462, Institute for the Study of Labor (IZA).
    5. McDonald Bruce D & Eger Robert J, 2010. "The Defense-Growth Relationship: An Economic Investigation into Post-Soviet States," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 16(1), pages 1-28, September.

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