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Initial reforms and dynamics of transition

  • Ariane Tichit Miniscloux

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

  • Solenne Tanguy

    (CREG - Centre de recherche en économie de Grenoble - Université Pierre Mendès-France - Grenoble II : EA4625)

This article analyses the impact on the labor market of the transition from a state-controlled economy towards a market economy. We consider a dynamic matching-model with a declining and an emerging competitive sector. We show that there are two opposite strategies in the move towards a market economy: a massive decrease in employment or a small decrease in employment in the non-competitive sector. We find that the transition is achieved faster with a big reduction in state employment than with a small one. Surprisingly, the end of transition is also characterized by lower unemployment when there are massive layoffs - because in the short run, the high unemployment implied by the massive decrease makes job creation in the competitive sector more profitable. In fact, this seems to have been the way chosen by most of the CEECs.

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Paper provided by HAL in its series Working Papers with number halshs-00687532.

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Date of creation: 13 Apr 2012
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Handle: RePEc:hal:wpaper:halshs-00687532
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  1. Tichit, Ariane, 2006. "The optimal speed of transition revisited," European Journal of Political Economy, Elsevier, vol. 22(2), pages 349-369, June.
  2. Berglöf, Erik & Bruynooghe, Lise & Harmgart, Heike & Sanfey, Peter & Schweiger, Helena & Zettelmeyer, Jeromin, 2010. "European Transition at Twenty," Working Paper Series wp2010-91, World Institute for Development Economic Research (UNU-WIDER).
  3. Anna Maria Ferragina & Francesco Pastore, 2008. "Mind The Gap: Unemployment In The New Eu Regions," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 73-113, 02.
  4. Giulia Faggio, 2007. "Job destruction, job creation and unemployment in transition countries: what can we learn?," LSE Research Online Documents on Economics 19716, London School of Economics and Political Science, LSE Library.
  5. 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 219-39, February.
  6. Hartmut Lehmann & Patrick Paul Walsh, 1999. "Gradual restructuring and Structural Unemployment in Poland. A Legacy of Central Planning," LICOS Discussion Papers 7899, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  7. Lehmann, Hartmut & Muravyev, Alexander, 2011. "Labor Markets and Labor Market Institutions in Transition Economies," IZA Discussion Papers 5905, Institute for the Study of Labor (IZA).
  8. Pietro Garibaldi & Zuzana Brixiova, 1997. "Labor Market Institutions and Unemployment Dynamics in Transition Economies," IMF Working Papers 97/137, International Monetary Fund.
  9. Tito Boeri & Katherine Terrell, 2001. "Institutional Determinants of Labor Reallocation in Transition," William Davidson Institute Working Papers Series 384, William Davidson Institute at the University of Michigan.
  10. Sergio Godoy & Joseph Stiglitz, 2006. "Growth, Initial Conditions, Law and Speed of Privatization in Transition Countries: 11 Years Later," NBER Working Papers 11992, National Bureau of Economic Research, Inc.
  11. 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.
  12. Boeri, Tito & Macis, Mario, 2010. "Do unemployment benefits promote or hinder job reallocation?," Journal of Development Economics, Elsevier, vol. 93(1), pages 109-125, September.
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