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Skill Acquisition and Private Firm Creation in Transition Economies

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  • Zuzana Brixiova
  • Wenli Li

Abstract

This paper studies relation between availability of skilled workers and creation of private firms in transition economies using a dynamic general equilibrium model. It shows how the lack of skilled workers lowers the rate of Creation of private firms by increasing wages and hence lowering profitability of these firms. The lower number of private firms leads to a shift of the labor force into the informal sector and slows the recovery of the aggregate output and labor productivity. The paper also demonstrates how policies that discourage skill acquisition by workers, such as excess wage taxation and ad hoc cuts in expenditures for education, have a negative impact on the economy.

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File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp162.pdf
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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 162.

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Length: pages
Date of creation: 01 Jun 1998
Date of revision:
Handle: RePEc:wdi:papers:1998-162

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  1. Green Edward J., 1993. "Privatization, the Entrepreneurial Sector, and Growth in Post-Comecon Economies," Journal of Comparative Economics, Elsevier, vol. 17(2), pages 407-417, June.
  2. Ernesto Hernández-Catá, 1997. "Liberalization and the Behavior of Output during the Transition from Plan to Market," IMF Staff Papers, Palgrave Macmillan, vol. 44(4), pages 405-429, December.
  3. Bankim Chadha & Fabrizio Coricelli & Kornélia Krajnyák, 1993. "Economic Restructuring, Unemployment, and Growth in a Transition Economy," IMF Staff Papers, Palgrave Macmillan, vol. 40(4), pages 744-780, December.
  4. A. Richter & M.E. Schaffer, 1996. "The Performance of De Novo Private Firms in Russian Manufacturing," CERT Discussion Papers 9610, Centre for Economic Reform and Transformation, Heriot Watt University.
  5. Kluve, Jochen & Lehmann, Hartmut & Schmidt, Christoph M., 1999. "Active Labor Market Policies in Poland: Human Capital Enhancement, Stigmatization, or Benefit Churning?," Journal of Comparative Economics, Elsevier, vol. 27(1), pages 61-89, March.
  6. Ernesto Hernández-Catá, 1997. "Liberalization and the Behavior of Output During the Transition from Plan to Market," IMF Working Papers 97/53, International Monetary Fund.
  7. Snower, Dennis J., 1994. "The Low-Skill, Bad-Job Trap," CEPR Discussion Papers 999, C.E.P.R. Discussion Papers.
  8. Wyznikiewicz, B. & Pinto, B. & Grabowski, M., 1993. "Coping with Capitalism; The new Polish Entrepreneurs," Papers 18, World Bank - International Finance Corporation.
  9. Blanchard, Olivier Jean & Aghion, Philippe, 1994. "On the Speed of Transition in Central Europe," Scholarly Articles 4481322, Harvard University Department of Economics.
  10. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  11. Brixiova, Zuzana & Kiyotaki, Nobuhiro, 1997. "Private sector development in transition economies," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 46(1), pages 241-279, June.
  12. Andrew Atkeson & Patrick J. Kehoe, 1995. "Industry evolution and transition: measuring investment in organization," Staff Report 201, Federal Reserve Bank of Minneapolis.
  13. Barro, Robert J., 1992. "Human capital and economic growth," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 199-216.
  14. repec:imf:imfpdp:9708 is not listed on IDEAS
  15. Wenli Li, 1997. "Entrepreneurship and government subsidies under capital constraints: a general equilibrium analysis," Working Paper 97-09, Federal Reserve Bank of Richmond.
  16. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
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