Labor Markets and the Financial Crisis: Evidence from Tajikistan

The financial crisis in 2008/2009 substantially influenced the everyday social and economic life of many Tajik people, including their behavior in the labor market. However, not much is known about the dynamics of the labor markets of the transition economies, especially in the context of the current financial crisis. Arguably, this is mainly due to paucity of panel data. In this paper, we aim to study the impact of the economic crisis on individual labor market outcomes in Tajikistan. This is the first study investigating the possible impact of the financial crisis in a transition country and uses a unique panel data set from Tajikistan. Although an impact evaluation in the true sense is impossible, due to the lack of a control group, comparing before and after-crisis outcomes can give insights as to how the crisis might have affected labor market outcomes. We do this by calculating transition probabilities between employment categories between 2007 and 2009, using a simple count method as well as predicted probabilities from multinomial probit regressions. Our results suggest an increased probability of moving into unemployment, inactivity or unpaid work during the crisis, with the self-employed being at more risk than the wage employed. This effect is more pronounced for females, as well as for very young and very old individuals. We also find that labor migration (predominantly to Russia) could be a mitigation strategy during the crisis.