IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp4673.html
   My bibliography  Save this paper

How Important Are Labor Market Institutions for Labor Market Performance in Transition Countries?

Author

Listed:
  • Lehmann, Hartmut

    () (University of Bologna)

  • Muravyev, Alexander

    () (Higher School of Economics)

Abstract

This paper offers a first comprehensive study of the relationship between labor market institutions and policies and labor market performance in the countries of Eastern Europe and Central Asia, which in the last two decades experienced radical economic and institutional transformations. Based on a new and unique hand-collected dataset, the paper first documents the evolution of labor market institutions and policies in the transition region. The data show a clear trend towards liberalization of labor markets, especially in the countries of the former Soviet Union, but also substantial differences across the countries studied. Second, the paper takes advantage of the large variation in the key economic and institutional variables to test several predictions concerning the role of institutions and polices in explaining labor market outcomes. The results of our econometric analysis are generally consistent with the view that institutions matter for labor market outcomes, and that deregulation of the labor markets improves their performance. The analysis also suggests several significant interactions between different institutions, which are in line with the idea of reform complementarity and broad reform packages. We also show that there are important advantages of focusing on a broader set of labor market outcomes, and not only on the unemployment rate, which until now has been the main approach in the empirical literature.

Suggested Citation

  • Lehmann, Hartmut & Muravyev, Alexander, 2009. "How Important Are Labor Market Institutions for Labor Market Performance in Transition Countries?," IZA Discussion Papers 4673, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4673
    as

    Download full text from publisher

    File URL: http://ftp.iza.org/dp4673.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Amable, Bruno & Demmou, Lilas & Gatti, Donatella, 2007. "Employment Performance and Institutions: New Answers to an Old Question," IZA Discussion Papers 2731, Institute for the Study of Labor (IZA).
    2. Belot, Michele & van Ours, Jan C., 2001. "Unemployment and Labor Market Institutions: An Empirical Analysis," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 403-418, December.
    3. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    4. David T. Coe & Dennis J. Snower, 1997. "Policy Complementarities: The Case for Fundamental Labor Market Reform," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 1-35, March.
    5. Juan C. Botero & Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "The Regulation of Labor," The Quarterly Journal of Economics, Oxford University Press, vol. 119(4), pages 1339-1382.
    6. Roland Beck & Annette Kamps & Elitza Mileva, 2007. "Long-term growth prospects for the Russian economy," Occasional Paper Series 58, European Central Bank.
    7. Randolph L. Bruno & Riccardo Rovelli, 2010. "Labour Market Policies and Outcomes in the Enlarged EU," Journal of Common Market Studies, Wiley Blackwell, vol. 48, pages 661-685, June.
    8. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, January.
    9. Katharina Pistor & Martin Raiser & Stanislaw Gelfer, 2000. "Law and Finance in Transition Economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 325-368, July.
    10. Eichhorst, Werner & Feil, Michael & Braun, Christoph, 2008. "What Have We Learned? Assessing Labor Market Institutions and Indicators," IZA Discussion Papers 3470, Institute for the Study of Labor (IZA).
    11. Alberto Behar, 2009. "Tax Wedges, Unemployment Benefits and Labour Market Outcomes in the New EU Members," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(1), pages 069-092, March.
    12. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
    13. Sandrine Cazes & Alena Nesporova, 2004. "Labour markets in transition: balancing flexibility and security in Central and Eastern Europe," Revue de l'OFCE, Presses de Sciences-Po, vol. 91(5), pages 23-54.
    14. Boeri, Tito & Lehmann, Hartmut, 1999. "Unemployment and Labor Market Policies in Transition Countries," Journal of Comparative Economics, Elsevier, vol. 27(1), pages 1-3, March.
    15. Andrea Bassanini & Romain Duval, 2009. "Unemployment, institutions, and reform complementarities: re-assessing the aggregate evidence for OECD countries," Oxford Review of Economic Policy, Oxford University Press, vol. 25(1), pages 40-59, Spring.
    16. Djankov, Simeon & Ramalho, Rita, 2009. "Employment laws in developing countries," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 3-13, March.
    17. Baccaro, Lucio & Rei, Diego, 2007. "Institutional Determinants of Unemployment in OECD Countries: Does the Deregulatory View Hold Water?," International Organization, Cambridge University Press, vol. 61(03), pages 527-569, July.
    18. Horst Feldmann, 2008. "Business regulation and labor market performance around the world," Journal of Regulatory Economics, Springer, vol. 33(2), pages 201-235, April.
    19. Kamila Fialová & OndÅej Schneider, 2009. "Labor Market Institutions and Their Effect on Labor Market Performance in the New EU Member Countries," Eastern European Economics, Taylor & Francis Journals, vol. 47(3), pages 57-83, May.
    20. Tito Boeri & Katherine Terrell, 2002. "Institutional Determinants of Labor Reallocation in Transition," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 51-76, Winter.
    21. Olivier Blanchard, 2006. "European unemployment: the evolution of facts and ideas," Economic Policy, CEPR;CES;MSH, vol. 21(45), pages 5-59, January.
    22. Eamets, Raul & Masso, Jaan, 2004. "Labour Market Flexibility and Employment Protection Regulation in the Baltic States," IZA Discussion Papers 1147, Institute for the Study of Labor (IZA).
    23. Howell David R. & Baker Dean & Glyn Andrew & Schmitt John, 2007. "Are Protective Labor Market Institutions at the Root of Unemployment? A Critical Review of the Evidence," Capitalism and Society, De Gruyter, vol. 2(1), pages 1-73, May.
    24. Alexander Muravyev, 2008. "Human capital externalities," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(3), pages 415-443, July.
    25. Sjef Ederveen & Laura Thissen, 2007. "Can labour market institutions explain high unemployment rates in the new EU member states?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 34(4), pages 299-317, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martin Guzi, 2014. "An Empirical Analysis of Welfare Dependence in the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(5), pages 407-431, November.
    2. Kamila Fialová, 2010. "Labor Institutions and their Impact on Shadow Economies in Europe," Working Papers IES 2010/29, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Dec 2010.
    3. Zimmermann, Klaus F. & Biavaschi, Costanza & Eichhorst, Werner & Giulietti, Corrado & Kendzia, Michael J. & Muravyev, Alexander & Pieters, Janneke & Rodríguez-Planas, Núria & Schmidl, Ricarda, 2013. "Youth Unemployment and Vocational Training," Foundations and Trends(R) in Microeconomics, now publishers, vol. 9(1–2), pages 1-157, December.
      • Biavaschi, Costanza & Eichhorst, Werner & Giulietti, Corrado & Kendzia, Michael J. & Muravyev, Alexander & Pieters, Janneke & Rodríguez-Planas, Núria & Schmidl, Ricarda & Zimmermann, Klaus F., 2012. "Youth Unemployment and Vocational Training," IZA Discussion Papers 6890, Institute for the Study of Labor (IZA).
    4. H. Lehmann & A. Muravyev, 2010. "Labor market institutions and labor market performance: what can we learn from transition countries?," Working Papers 714, Dipartimento Scienze Economiche, Universita' di Bologna.
    5. Anna Lukiyanova & Nina Vishnevskaya, 2015. "The Decentralization of Minimum Wage Setting in Russia Economies," HSE Working papers WP BRP 90/EC/2015, National Research University Higher School of Economics.
    6. Louis Jaeck & Sehjeong Kim, 2014. "The Impact of EMU Enlargement on Structural Reforms: A Political Economy Approach," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 20(1), pages 73-86, February.
    7. Anna Lukiyanova, 2011. "Effects of Minimum Wages on the Russian Wage Distribution," HSE Working papers WP BRP 09/EC/2011, National Research University Higher School of Economics.
    8. Jens Holscher & Cristiano Perugini & Fabrizio Pompei, 2011. "Wage inequality, labour market flexibility and duality in Eastern and Western Europe," Post-Communist Economies, Taylor & Francis Journals, vol. 23(3), pages 271-310.
    9. World Bank, 2011. "Challenges to Enterprise Performance in the Face of the Financial Crisis : Eastern Europe and Central Asia," World Bank Publications, The World Bank, number 2316, July.
    10. Hazans, Mihails, 2011. "What Explains Prevalence of Informal Employment in European Countries: The Role of Labor Institutions, Governance, Immigrants, and Growth," IZA Discussion Papers 5872, Institute for the Study of Labor (IZA).
    11. Juan Carlos Cuestas & Luis A. Gil-Alana & Karl Taylor, 2012. "Inflation convergence in Central and Eastern Europe with a view to adopting the euro," Working Papers 12-01, Asociación Española de Economía y Finanzas Internacionales.
    12. repec:kap:iaecre:v:20:y:2014:i:1:p:73-86 is not listed on IDEAS
    13. Kamila Fialová & Ondrej Schneider, 2014. "Labor Market Institutions and Their Impact on Shadow Economies in Europe," Review of Economics and Institutions, Università di Perugia, vol. 5(1).
    14. Juan Carlos Cuestas & Luis A. Gil-Alana & Karl Taylor, 2016. "Inflation convergence in Central and Eastern Europe vs. the Eurozone: Non-linearities and long memory," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(5), pages 519-538, November.

    More about this item

    Keywords

    unemployment; labor market institutions; transition economies;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp4673. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak). General contact details of provider: http://www.iza.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.