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Employment and Wages in Enterprises Under Communism and in Transition: Evidence From Central Europe and Russia

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  • Swati Basu
  • Saul Estrin
  • Jan Svejnar

Abstract

This paper presents a comparative analysis of employment and wage behavior of firms in the Czech Republic, Slovakia, Poland, Hungary and Russia during the late 1980s to the early 1990s. The four main findings are: 1) There is evidence of some (not excessive) labor hoarding before the transition and it disappeared shortly thereafter; 2) The estimated elasticities of demand grew over the transition, starting from zero in Russia, the Czech Republic and Slovakia and from sizeable levels in Hungary and Poland. By the end of the period, the elasticities for the four East European countries were quite similar and those for Russia had not changed significantly; 3) Once other factors are controlled for, there is no significant difference in the employment behavior among firms by ownership or legal status. However, Czech, Slovak and Polish private firms did pay higher wages than state-owned firms immediately after the start of the transition; 4) A closer examination in the Czech Republic of state-owned enterprises (SOEs) and newly established firms indicates that SOEs had lower elasticities of employment and allowed less rent sharing than the newly established firms.

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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 440.

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Length: pages
Date of creation: 01 Jun 2000
Date of revision:
Handle: RePEc:wdi:papers:2000-440

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Keywords: Russia; Central Europe; employment; wages; Labor and Human Resources;

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  1. János Kornai, 1994. "Highway and Byways: Studies on Reform and Postcommunist Transition," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262111985, December.
  2. Svejnar, Jan, 1982. "On the theory of a participatory firm," Journal of Economic Theory, Elsevier, Elsevier, vol. 27(2), pages 313-330, August.
  3. Svejnar, Jan, 1986. "Bargaining Power, Fear of Disagreement, and Wage Settlements: Theory and Evidence from U.S. Industry," Econometrica, Econometric Society, Econometric Society, vol. 54(5), pages 1055-78, September.
  4. Prasnikar, Janez, et al, 1994. "Behavior of Participatory Firms in Yugoslavia: Lessons for Transforming Economies," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 728-41, November.
  5. Barberis, Nicholas & Boycko, Maxim & Shleifer, Andrei & Tsukanova, Natalia, 1996. "How Does Privatization Work? Evidence from the Russian Shops," Scholarly Articles 3451306, Harvard University Department of Economics.
  6. Orley Ashenfelter & James N. Brown, 1985. "Testing the Efficiency of Employment Contracts," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 573, Princeton University, Department of Economics, Industrial Relations Section..
  7. Lizal, Lubomir & Singer, Miroslav & Svejnar, Jan, 1997. "Enterprise Break-ups and Performance During the Transition," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1757, C.E.P.R. Discussion Papers.
  8. Rodrik, Dani, 1992. "Foreign Trade in Eastern Europe's Transition: Early Results," CEPR Discussion Papers, C.E.P.R. Discussion Papers 676, C.E.P.R. Discussion Papers.
  9. Münich, Daniel & Svejnar, Jan & Terrell, Katherine, 1999. "Returns to Human Capital Under the Communist Wage Grid and During the Transition to a Market Economy," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2332, C.E.P.R. Discussion Papers.
  10. R)chard E. Quandt & Harvey S. Rosen, 1989. "Endogenous Output in an Aggregate Model of the Labor Market," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0074, National Bureau of Economic Research, Inc.
  11. Bresson, G & Kramarz, F & Sevestre, P, 1992. "Heterogeneous Labor and the Dynamics of Aggregate Labor Demand: Some Estimations Using Panel Data," Empirical Economics, Springer, Springer, vol. 17(1), pages 153-68.
  12. Aghion, Philippe & Blanchard, Olivier & Burgess, Robin, 1994. "The behaviour of state firms in eastern Europe, pre-privatisation," European Economic Review, Elsevier, Elsevier, vol. 38(6), pages 1327-1349, June.
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Cited by:
  1. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," NBER Working Papers 11338, National Bureau of Economic Research, Inc.
  2. Natalia V. Smirnova, 2003. "Re-employment Probabilities and Wage Offer Function for Russian Labor Market," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 547, William Davidson Institute at the University of Michigan.
  3. Maxim Bouev, 2004. "Diverging Paths: Transition in the Presence of the Informal Sector," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 2004-689, William Davidson Institute at the University of Michigan.
  4. Tichit, Ariane, 2006. "The optimal speed of transition revisited," European Journal of Political Economy, Elsevier, Elsevier, vol. 22(2), pages 349-369, June.
  5. Tomasz Mickiewicz & Kate Bishop, 2003. "Wage Determination: Privatised, New Private And State Owned Companies. Empirical Evidence From Panel Data," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 584, William Davidson Institute at the University of Michigan.
  6. Vit Sorm & Katherine Terrell, 1999. "Sectoral Restructuring and Labor Mobility: A Comparative Look at the Czech Republic," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 273, William Davidson Institute at the University of Michigan.
  7. Jaan Masso & Almas Heshmati, 2004. "The optimality and overuse of labour in Estonian manufacturing enterprises," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 12(4), pages 683-720, December.
  8. Mickiewicz, Tomasz & Gerry, Christopher J. & Bishop, Kate, 2005. "Privatisation, corporate control and employment growth: Evidence from a panel of large Polish firms, 1996-2002," Economic Systems, Elsevier, Elsevier, vol. 29(1), pages 98-119, March.
  9. Jan Svejnar, 2001. "Transition Economies: Performances and Challenges," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 415, William Davidson Institute at the University of Michigan.
  10. Sorm, Vit & Terrell, Katherine, 1999. "A Comparative Look at Labour Mobility in the Czech Republic : Where Have All the Workers Gone?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2263, C.E.P.R. Discussion Papers.
  11. Kate Bishop & Tomasz Mickiewicz, 2003. "While Labour Hoarding May Be Over, Insiders’ Control Is Not. Determinants Of Employment Growth In Polish Large Firms, 1996-2001," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 2003-593, William Davidson Institute at the University of Michigan.
  12. Jan Svejnar, 2002. "Labor Market Flexibility in Central and East Europe," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 496, William Davidson Institute at the University of Michigan.
  13. Jed Friedman, 2004. "Firm Ownership and Internal Labor Practices in a Transition Economy: An Exploration of Worker Skill Acquisition in Vietnam," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 2004-696, William Davidson Institute at the University of Michigan.
  14. Stefan Bojnec, 2003. "Wage formation during economic transformation: macroeconomic facts and firm survey evidence from Slovenia," Post-Communist Economies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 15(4), pages 571-593.

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