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Economic Restructuring, Unemployment, and Growth in a Transition Economy


  • Bankim Chadha

    (International Monetary Fund)

  • Fabrizio Coricelli

    (International Monetary Fund)

  • Kornélia Krajnyák

    (International Monetary Fund)


This paper develops a model of the process of reallocation of labor from the state sector to the private sector. When growth is exogenously determined, we show that in the initial stages of transition unemployment will rise. After a critical stage in the transition process, restructuring is accompanied by a decline in unemployment. When growth is endogenously determined, and human capital is acquired by learning-by-doing, we show that whether or not restructuring eventually occurs is determined by the level of human capital in the private sector and the rate of unemployment. The effects of various shocks and government policies on the costs, speed, and eventual outcome of restructuring are analyzed.

Suggested Citation

  • 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.
  • Handle: RePEc:pal:imfstp:v:40:y:1993:i:4:p:744-780

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    References listed on IDEAS

    1. Michael P. Dooley, 1988. "Capital Flight: A Response to Differences in Financial Risks," IMF Staff Papers, Palgrave Macmillan, vol. 35(3), pages 422-436, September.
    2. Ozler, Sule*Huizinga, Harry, 1991. "How factors in creditor countries affect secondary market prices for developing country debt," Policy Research Working Paper Series 622, The World Bank.
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    8. Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991. "The Pure Theory of Country Risk," NBER Chapters,in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435 National Bureau of Economic Research, Inc.
    9. Leonardo Bartolini & Avinash Dixit, 1991. "Market Valuation of Illiquid Debt and Implications for Conflicts among Creditors," IMF Staff Papers, Palgrave Macmillan, vol. 38(4), pages 828-849, December.
    10. Easterly, William R., 1989. "Fiscal adjustment and deficit financing during the debt crisis," Policy Research Working Paper Series 138, The World Bank.
    11. Boehmer, Ekkehart & Megginson, William L, 1990. " Determinants of Secondary Market Prices for Developing Country Syndicated Loans," Journal of Finance, American Finance Association, vol. 45(5), pages 1517-1540, December.
    12. Stone, Mark R., 1991. "Are sovereign debt secondary market returns sensitive to macroeconomic fundamentals? Evidence from the contemporary and interwar markets," Journal of International Money and Finance, Elsevier, vol. 10(1, Supple), pages 100-122, March.
    13. Anayiotos, George & de Pinies, Jaime, 1990. "The secondary market and the international debt problem," World Development, Elsevier, vol. 18(12), pages 1655-1669, December.
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    Cited by:

    1. Nauro F. Campos & Abrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 793-836, September.
    2. Denizer, Cevdet, 1997. "Stabilization, adjustment, and growth prospects in transition economies," Policy Research Working Paper Series 1855, The World Bank.
    3. Treier, Volker, 1999. "Unemployment in reforming countries: Causes, fiscal impacts and the success of transformation," BERG Working Paper Series 29, Bamberg University, Bamberg Economic Research Group.
    4. Caballero, Ricardo J. & Hammour, Mohamad L., 1996. "On the ills of adjustment," Journal of Development Economics, Elsevier, vol. 51(1), pages 161-192, October.
    5. Nikolay Nenovsky & Kalina Dimitrova, 2002. "Dual Inflation Under the Currency Board: The Challenges of Bulgarian EU Accession," William Davidson Institute Working Papers Series 487, William Davidson Institute at the University of Michigan.
    6. Zuzana Brixiova & Wenli Li, 1998. "Skill Acquisition and Private Firm Creation in Transition Economies," William Davidson Institute Working Papers Series 162, William Davidson Institute at the University of Michigan.
    7. Konings, Jozef & Lehmann, Hartmut & Schaffer, Mark E., 1996. "Job creation and job destruction in a transition economy: Ownership, firm size, and gross job flows in Polish manufacturing 1988-1991," Labour Economics, Elsevier, vol. 3(3), pages 299-317, October.
    8. repec:eee:ecosys:v:41:y:2017:i:2:p:203-214 is not listed on IDEAS
    9. Ariane Tichit, 1998. "Reprise économique dans les pays post-communistes : application d'un modèle de durée," Économie et Prévision, Programme National Persée, vol. 136(5), pages 73-92.
    10. Chadha, Bankim & Coricelli, Fabrizio, 1997. "Fiscal constraints and the speed of transition," Journal of Development Economics, Elsevier, vol. 52(1), pages 221-249, February.
    11. J. Konings & H. Lehmann & M.E. Schaffer, 1996. "Job Creation and Job Destruction in a Transition Economy: Ownership, Firm Size," CERT Discussion Papers 9611, Centre for Economic Reform and Transformation, Heriot Watt University.
    12. Randolph Luca Bruno, 2003. "Speed of Transition, Unemployment Dynamics and Nonemployment Policies: Evidence from the Visegrad Countries," LEM Papers Series 2003/23, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    13. Alessandro Acquisti & Hartmut Lehmann, 2000. "Job Creation and Job Destruction in the Russian Federation," Trinity Economics Papers 20001, Trinity College Dublin, Department of Economics.

    More about this item

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • P2 - Economic Systems - - Socialist Systems and Transition Economies


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