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Estonian labour market and EMU membership - challenges and policy options

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  • Andreas Freytag

Abstract

With the planned membership in EMU, Estonia will give up every option to pursue a discretionary monetary policy. This demands a very flexible labour market, returning to equilibrium by itself after a negative external shock. In general, the Estonian labour market regime allows for flexibility and labour force mobility. Nevertheless, there is a serious problem on the Estonian labour market, namely, a mismatch with respect to qualification. The paper discusses three potential remedies for this problem: 1) further development of the relatively underdeveloped social dialogue in Estonia, 2) an increase of the low extent of public labour market spending, and 3) a significant improvement of the education and training system. It turns out that concentration on education policy promises the highest yields. We conclude by referring to earmarked education vouchers. Such a system allows to fully employ the capacities of competition to generate the structure of qualifications necessary to increase the level of employment in Estonia.

Suggested Citation

  • Andreas Freytag, 2002. "Estonian labour market and EMU membership - challenges and policy options," Bank of Estonia Working Papers 2002-11, Bank of Estonia, revised 10 Dec 2002.
    • Handle: RePEc:eea:boewps:wp2002-11
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    References listed on IDEAS

    as
    1. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
    2. David F. Bradford & Daniel N. Shaviro, 1999. "The Economics of Vouchers," NBER Working Papers 7092, National Bureau of Economic Research, Inc.
    3. Tiiu Paas & Raul Eamets, 2002. "Labour Flexibility and Migration in the EU Eastward Enlargement Context: The Case of the Baltic States," Eastward Enlargement of the Euro-zone Working Papers wp11, Free University Berlin, Jean Monnet Centre of Excellence, revised 01 Sep 2002.
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    Cited by:

    1. Marit Rõõm, 2003. "Reservation wages in Estonia," Labor and Demography 0303001, University Library of Munich, Germany.
    2. Marit Hinnosaar, 2003. "Reservation wages in Estonia," Bank of Estonia Working Papers 2003-1, Bank of Estonia, revised 11 Oct 2003.
    3. Renzo Orsi & Katarzyna Zukrowska, 2004. "Policy Advice: Markets and Policies," Eastward Enlargement of the Euro-zone Working Papers wp20, Free University Berlin, Jean Monnet Centre of Excellence, revised 01 Feb 2004.

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