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Labor Markets, Inequality and Poverty in Georgia

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  • Yemtsov, Ruslan

    () (World Bank)

Abstract

The labor market is the main channel through which economic growth affects poverty. This paper is the first empirical account of main channels through which the growth in transition period has affected labor market and living standards in Georgia. It is based on both the official aggregate statistics and data from a representative household survey fielded in 1996-1997. The paper finds that in Georgia the labor market has shown outstanding flexibility during a period of severe political and economic turmoil in 1992-1995. Despite the catastrophic fall in GDP employment contracted only marginally. This flexibility has been achieved mainly through the informalization of employment, and through the reallocation of labor towards small-scale agriculture. Informalization has dampened the impact of the crisis and served to protect the poor, stabilizing the poverty rate at the politically and socially acceptable level (around 15% of the population). However, the informalization limited the impact of market forces favoring human capital accumulation on the formation of earnings. Today, a large and growing fraction of the Georgian labor force relies on self-employment as the primary means to earn an income. For some, this is an avenue for earnings mobility and growth; for the majority, however, self-employment remains constrained to low-productivity agricultural or trading activities, with little earnings stability and little potential for long term earnings growth. Prospects for the future hinge critically on the economy’s ability to generate new private formal employment, and to reallocate labor away from these low-productivity activities into higher value added sectors.

Suggested Citation

  • Yemtsov, Ruslan, 2001. "Labor Markets, Inequality and Poverty in Georgia," IZA Discussion Papers 251, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp251
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    Cited by:

    1. Pagés, Carmen & Stampini, Marco, 2009. "No education, no good jobs? Evidence on the relationship between education and labor market segmentation," Journal of Comparative Economics, Elsevier, vol. 37(3), pages 387-401, September.
    2. Olga Pavlova & Oleksandr Rohozynsky, 2005. "Labor Markets in CIS Countries," CASE Network Studies and Analyses 0311, CASE-Center for Social and Economic Research.
    3. repec:ilo:ilowps:355192 is not listed on IDEAS
    4. Lokshin, Michael & Yemtsov, Ruslan, 2003. "Evaluating the impact of infrastructure rehabilitation projects on household welfare in rural Georgia," Policy Research Working Paper Series 3155, The World Bank.
    5. Tamar Khitarishvili, 2013. "Evaluating the Gender Wage Gap in Georgia, 2004 - 2011," Economics Working Paper Archive wp_768, Levy Economics Institute.
    6. Bernabè, Sabine. & Singh, Andrea., 2002. "A profile of informal employment : the case of Georgia," ILO Working Papers 993551923402676, International Labour Organization.
    7. Winkelmann, Rainer, 2001. "Why Do Firms Recruit Internationally? Results from the IZA International Employer Survey 2000," IZA Discussion Papers 331, Institute for the Study of Labor (IZA).
    8. World Bank, 2002. "Georgia : Poverty Update," World Bank Other Operational Studies 15447, The World Bank.

    More about this item

    Keywords

    Employment; unemployment; self-employment; informal sector; real wage; productivity; earnings; inequality; returns to education; poverty; gender gap;

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J4 - Labor and Demographic Economics - - Particular Labor Markets

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