IDEAS home Printed from https://ideas.repec.org/p/car/carecp/04-08.html
   My bibliography  Save this paper

Output and Unemployment Dynamics in Transition

Author

Abstract

This paper examines transition dynamics in a search economy. We contrast two extreme cases: a completely unexpected reform and a fully anticipated reform. We view the former as a metaphor for a reform being announced and implemented with immediate effect, the latter as a metaphor for a reform being announced in advance of its implementation. In contrast to models with convex adjustment costs, we show that announcing the reform in advance leads to stagnation in anticipation of the reform and output cycles after the implementation that are more volatile than had a reform of identical magnitude been implemented immediately. However, the more volatile output trajectory of the anticipated case nonetheless yields a higher PDV of output than an unanticipated reform of equal magnitude. This suggests, therefore, that an anticipated reform is better than an unanticipated reform, even though the former induces greater volatility.

Suggested Citation

  • Vivek H. Dehejia & Douglas W. Dwyer, 2004. "Output and Unemployment Dynamics in Transition," Carleton Economic Papers 04-08, Carleton University, Department of Economics, revised Jun 2004.
  • Handle: RePEc:car:carecp:04-08
    as

    Download full text from publisher

    File URL: http://www1.carleton.ca/economics/research/working-papers/carleton-economic-papers-cep-2001-2010/
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dehejia, Vivek H., 2001. "Optimal restructuring under a political constraint," Journal of Economic Dynamics and Control, Elsevier, vol. 25(12), pages 1989-2006, December.
    2. Boucekkine, Raouf & Licandro, Omar & Paul, Christopher, 1997. "Differential-difference equations in economics: On the numerical solution of vintage capital growth models," Journal of Economic Dynamics and Control, Elsevier, vol. 21(2-3), pages 347-362.
    3. Gomes, Joao & Greenwood, Jeremy & Rebelo, Sergio, 2001. "Equilibrium unemployment," Journal of Monetary Economics, Elsevier, vol. 48(1), pages 109-152, August.
    4. Philippe Aghion & Olivier Jean Blanchard, 1994. "On the Speed of Transition in Central Europe," NBER Chapters, in: NBER Macroeconomics Annual 1994, Volume 9, pages 283-330, National Bureau of Economic Research, Inc.
    5. Dehejia, Vivek, 1997. "Optimal Restructuring Under a Political Constraint: A General Equilibrium Approach," CEPR Discussion Papers 1619, C.E.P.R. Discussion Papers.
    6. Richard Ericson, 1996. "Restructuring an Industry During Transition," William Davidson Institute Working Papers Series 36, William Davidson Institute at the University of Michigan.
    7. Boucekkine, Raouf & Germain, Marc & Licandro, Omar, 1997. "Replacement Echoes in the Vintage Capital Growth Model," Journal of Economic Theory, Elsevier, vol. 74(2), pages 333-348, June.
    8. King, Robert G & Rebelo, Sergio T, 1993. "Transitional Dynamics and Economic Growth in the Neoclassical Model," American Economic Review, American Economic Association, vol. 83(4), pages 908-931, September.
    9. Atkeson, Andrew & Kehoe, Patrick J, 1996. "Social Insurance and Transition," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 377-401, May.
    10. Mariano Tommasi & Andrés Velasco, 1996. "Where are we in the political economy of reform?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 1(2), pages 187-238.
    11. Castanheira, Micael & Roland, Gerard, 2000. "The Optimal Speed of Transition: A General Equilibrium Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 219-239, February.
    12. Olivier Blanchard & Michael Kremer, 1997. "Disorganization," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1091-1126.
    13. Andrew Atkeson & Patrick Kehoe, 1997. "Industry Evolution and Transition: A Neoclassical Benchmark," NBER Working Papers 6005, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ichiro Iwasaki & Taku Suzuki, 2016. "Radicalism Versus Gradualism: An Analytical Survey Of The Transition Strategy Debate," Journal of Economic Surveys, Wiley Blackwell, vol. 30(4), pages 807-834, September.
    2. Vivek Dehejia & Douglas Dwyer, 2004. "Output and unemployment dynamics in transition," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 7(2), pages 69-81.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vivek Dehejia & Douglas Dwyer, 2004. "Output and unemployment dynamics in transition," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 7(2), pages 69-81.
    2. 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.
    3. Karoly Fazekas & Jeno Koltay (ed.), 2002. "The Hungarian Labour Market 2002," The Hungarian Labour Market Yearbooks, Institute of Economics, Centre for Economic and Regional Studies, number 2002, December.
    4. Stepan Jurajda & Katherine Terrell, 2001. "What Drives the Speed of Job Reallocation during Episodes of Massive Adjustment?," CERGE-EI Working Papers wp170, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    5. Zuzana Brixiova & Balázs Égert, 2010. "Modeling Institutions, Start-ups and Productivity during Transition," OECD Economics Department Working Papers 773, OECD Publishing.
    6. Gerard Rpland, 2001. "The Political Economy of Transition," William Davidson Institute Working Papers Series 413, William Davidson Institute at the University of Michigan.
    7. 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.
    8. Jurajda, Stepán & Terrell, Katherine, 2008. "Job Reallocation in Two Cases of Massive Adjustment in Eastern Europe," World Development, Elsevier, vol. 36(11), pages 2144-2169, November.
    9. Stepan Jurajda & Katherine Terrell, 2000. "Optimal Speed of Transition: Micro Evidence from the Czech Republic," William Davidson Institute Working Papers Series 355, William Davidson Institute at the University of Michigan.
    10. Eicher, Theo S. & Schreiber, Till, 2010. "Structural policies and growth: Time series evidence from a natural experiment," Journal of Development Economics, Elsevier, vol. 91(1), pages 169-179, January.
    11. J. David Brown & John S. Earle, 2002. "Job Reallocation and Productivity Growth under Alternative Economic Systems and Policies: Evidence from the Soviet Transition," CERT Discussion Papers 0208, Centre for Economic Reform and Transformation, Heriot Watt University.
    12. Ulrich Brandt-Pollmann & Ralph Winkler & Sebastian Sager & Ulf Moslener & Johannes Schlöder, 2008. "Numerical Solution of Optimal Control Problems with Constant Control Delays," Computational Economics, Springer;Society for Computational Economics, vol. 31(2), pages 181-206, March.
    13. Grafe, Clemens & Wyplosz, Charles, 1997. "The Real Exchange Rate in Transition Economies," CEPR Discussion Papers 1773, C.E.P.R. Discussion Papers.
    14. Erling Steigum & Øystein Thøgersen, 2003. "Borrow and Adjust: Fiscal Policy and Sectoral Adjustment in an Open Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 699-724, May.
    15. Fabrice Collard & Omar Licandro & Luis A. Puch, 2008. "The short-run Dynamics of Optimal Growth Model with Delays," Annals of Economics and Statistics, GENES, issue 90, pages 127-143.
    16. Fabrice Collard & Omar Licandro, 2020. "The neoclassical model and the welfare costs of selection," Discussion Papers 2020/03, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    17. Svejnar, Jan, 2007. "China in Light of the Performance of Central and East European Economies," CEPR Discussion Papers 6320, C.E.P.R. Discussion Papers.
    18. Blanca MARTINEZ, 2002. "Adoption Costs, Age of Capital and Technological Substitution," LIDAM Discussion Papers IRES 2002024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    19. Andrew Atkeson & Patrick J. Kehoe, 2002. "The transition to a new economy after the Second Industrial Revolution," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    20. David de la Croix & Omar Licandro, 2013. "The Child is Father Of the Man: Implications for the Demographic Transition," Economic Journal, Royal Economic Society, vol. 123(567), pages 236-261, March.

    More about this item

    Keywords

    adjustment costs; industy restructuring; transition dynamics; policy reform;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • P1 - Political Economy and Comparative Economic Systems - - Capitalist Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:car:carecp:04-08. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Court Lindsay (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.