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Employment Determination in Enterprises under Communism and in Transition: Evidence from Central Europe

  • Basu, Swati

    ()

    (McGill University)

  • Estrin, Saul

    ()

    (London School of Economics)

  • Svejnar, Jan

    ()

    (Columbia University)

In this paper, we present a comparative analysis of employment determination in four transition economies as they move from central planning to a market economy in the early 1990s. We use firm level panel data sets from the Czech Republic, Hungary, Poland and Slovakia to estimate dynamic employment equations for the period immediately before and after the start of transition. We find evidence that firms behave for the most part as if they were on their labor demand curves, with little evidence of labor hoarding. There were significant cross-country variations in the determinants of employment during the reform process however. Hungarian and Polish firms started the transition already substantially reformed, and became even more responsive to market signals as transition proceeded. In contrast, firms in the Czech and Slovak republics started in the completely unresponsive mode characteristic of central planning, but rapidly caught up with their counterparts in Hungary and Poland.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1370.

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Length: 33 pages
Date of creation: Oct 2004
Date of revision:
Publication status: published in: Industrial and Labor Relations Review, 2005, 58 (3), 353-369
Handle: RePEc:iza:izadps:dp1370
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  1. Svejnar, Jan, 1986. "Bargaining Power, Fear of Disagreement, and Wage Settlements: Theory and Evidence from U.S. Industry," Econometrica, Econometric Society, vol. 54(5), pages 1055-78, September.
  2. Ham, John C & Svejnar, Jan & Terrell, Katherine, 1998. "Unemployment and the Social Safety Net during Transitions to a Market Economy: Evidence from the Czech and Slovak Republics," American Economic Review, American Economic Association, vol. 88(5), pages 1117-42, December.
  3. Svejnar, Jan, 1982. "On the theory of a participatory firm," Journal of Economic Theory, Elsevier, vol. 27(2), pages 313-330, August.
  4. Nickell, S.J., 1987. "Dynamic models of labour demand," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 9, pages 473-522 Elsevier.
  5. János Kornai, 1994. "Highway and Byways: Studies on Reform and Postcommunist Transition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262111985, June.
  6. Prasnikar, Janez, et al, 1994. "Behavior of Participatory Firms in Yugoslavia: Lessons for Transforming Economies," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 728-41, November.
  7. Orley Ashenfelter & James N. Brown, 1985. "Testing the Efficiency of Employment Contracts," Working Papers 573, Princeton University, Department of Economics, Industrial Relations Section..
  8. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  9. R)chard E. Quandt & Harvey S. Rosen, 1989. "Endogenous Output in an Aggregate Model of the Labor Market," NBER Technical Working Papers 0074, National Bureau of Economic Research, Inc.
  10. ZELLNER, Arnold & KMENTA, Jan & DREZE, Jacques H., . "Specification and estimation of Cobb-Douglas production function models," CORE Discussion Papers RP -12, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Hamermesh, Daniel S., 1987. "The demand for labor in the long run," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 8, pages 429-471 Elsevier.
  12. Dani Rodrik, 1994. "Foreign Trade in Eastern Europe's Transition: Early Results," NBER Chapters, in: The Transition in Eastern Europe, Volume 2: Restructuring, pages 319-356 National Bureau of Economic Research, Inc.
  13. Lubomir Lizal & Miroslav Singer & Jan Svejnar, 2001. "Enterprise Breakups And Performance During The Transition From Plan To Market," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 92-99, February.
  14. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S3-S39, June.
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