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Labour Market Reforms and Outcomes in Estonia

Author

Listed:
  • Zuzana Brixiova

    (United Nations Development Programme Swaziland, Lulinga House 5th floor, Mbabane, Swaziland)

  • Balázs Égert

    (1] Economics Department, OECD, Paris, France[2] EconomiX, University of Paris-X Nanterre, Paris, France.[3] CESifo, Munich, Germany.[4] William Davidson Institute, Michigan.)

Abstract

The unemployment rate in Estonia rose sharply in 2010 to one of the highest levels in the EU, after the country entered a severe recession in 2008. While the rate declined relatively rapidly in 2011, it remained high especially for the less educated. In 2009, the Employment Contract Law relaxed employment protection legislation and sought to raise income protection of the unemployed to facilitate transition from less to more productive jobs while mitigating social costs. Utilising a search model, this paper shows that increasing further labour market flexibility through reducing the tax wedge on labour would facilitate the structural transformation and reduce the long-term unemployment rate. Linking increases in unemployment benefits to participation in job search or training programmes would improve the unemployed workers’ incentives to search for jobs or retrain and the medium term labour market outcomes. Social protection schemes for the unemployed should be also strengthened as initially intended to give the unemployed sufficient time to search for adequate jobs or retrain for new opportunities.

Suggested Citation

  • Zuzana Brixiova & Balázs Égert, 2012. "Labour Market Reforms and Outcomes in Estonia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 54(1), pages 103-120, March.
    • Handle: RePEc:pal:compes:v:54:y:2012:i:1:p:103-120
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    Cited by:

    1. Fidrmuc, Jarko & Klein, Caroline & Price, Robert & Wörgötter, Andreas, 2013. "Slovakia: A Catching Up Euro Area Member In and Out of the Crisis," IZA Policy Papers 55, Institute of Labor Economics (IZA).
    2. Jeffrey Clemens, 2019. "Cross‐Country Evidence on Labor Market Institutions and Young Adult Employment through the Financial Crisis," Southern Economic Journal, John Wiley & Sons, vol. 86(2), pages 573-612, October.
    3. Raul Eamets, 2013. "Labour market and labour market policies during great recession: the case of Estonia," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-25, December.
    4. İbrahim Özmen & Selçuk Bali & Festus Victor Bekun, 2024. "Is Abrams curve a myth or reality? Evidence from two Baltic countries," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(3), pages 2709-2733, June.
    5. Lilas Demmou, 2012. "Matching Skills and Jobs in Estonia," OECD Economics Department Working Papers 1007, OECD Publishing.

    More about this item

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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