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Worker Displacement during the Transition: Experience from Slovenia

  • Orazem, Peter F.

    ()

    (Iowa State University)

  • Vodopivec, Milan

    ()

    (International School for Social and Business Studies, Celje, Slovenia)

  • Wu, Ruth

    (Federal Reserve Board)

The transition to market in Slovenia created labor displacements that were on par or greater than that experienced in North America in the 1980s. A simple theoretical model suggests that factors which raise the probability of layoff should also increase the probability of a quit, predictions that are borne out in data. Probability of both layoffs and quits fell with worker tenure, firm profitability and expected severance costs. Individuals facing a higher probability of displacement accepted slower wage growth than otherwise comparable workers. The incentives to avoid displacement were strong – workers that actually were displaced faced a slow process of transiting out of unemployment with only one-third finding reemployment. Correcting for selection, real wage losses for displaced workers are comparable to those reported for displaced workers in North America.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1297.

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Length: 37 pages
Date of creation: Sep 2004
Date of revision:
Publication status: published in: Economics of Transition, 2005, 13 (2), 311-340
Handle: RePEc:iza:izadps:dp1297
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