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Labour Market Flexibility And Migration In The Baltic States: Macro Evidences

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  • Tiiu Paas
  • Raul Eamets
  • Jaan Masso
  • Marit Room

Abstract

The Eastern enlargement of the European Union and the requirements of the European Monetary Union call for increased flexibility of labour markets in both the current EU members and candidate countries. If labour markets and institutions are rigid in the monetary union, market disequilibrium is likely to grow. The present paper aims to give a macroeconomic overview of the Baltic States’ labour market in the period 1995?2001, laying emphasis on the issues of labour market flexibility and labour migration in the context of EU eastward enlargement. The Baltic States comprise a particular regional cluster and an interesting case for making generalizations about the processes of transition and EU eastward enlargement, and developing a new field of economics - the economics of transition and integration. In real terms, one has to admit, the influence of the Baltic economies on the EU eastward enlargement processes can hardly be significant, as the very small size of the Baltic markets bears no comparison with either the markets of the current EU member states (EU15) or the other candidate countries (CC). The Baltic States have dutifully observed the main international standards regulating labour relations in accordance with the EU rules. Comparing the Baltic States’ labour market with those of EU15 and the other candidate countries, one comes to the conclusion that the Baltic States’ labour markets are flexible. The most flexible among them is the Estonian labour market followed by that of Latvia. However, predictably, after joining the EU, the labour markets of the new members may become more rigid due to the increasing influence on them of institutions and trade unions, and due to more generous funding of labour market policies. Moreover, a decline of wage flexibility can be predicted. Free movement of labour as a natural consequence of EU enlargement will also exert pressure on the Baltic labour markets due to the possible migration of better-qualified and flexible labour force, and cross-border movement of labour within the Baltic Sea Region countries. Coupled with ageing of the population, it may increase shortage of skilled labour. Consequently, if labour mobility increases and labour market flexibility declines remarkably during the enlargement processes, market disequilibrium is likely to grow in the Baltic States as well.

Suggested Citation

  • Tiiu Paas & Raul Eamets & Jaan Masso & Marit Room, 2003. "Labour Market Flexibility And Migration In The Baltic States: Macro Evidences," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 16, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    • Handle: RePEc:mtk:febawb:16
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    Cited by:

    1. Camilla Jensen, 2004. "Formal Integration: FDI and trade in Europe," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 5(1), pages 5-27, December.
    2. Eamets, Raul & Masso, Jaan, 2004. "Labour Market Flexibility and Employment Protection Regulation in the Baltic States," IZA Discussion Papers 1147, Institute of Labor Economics (IZA).
    3. Masso, Jaan & Eamets, Raul & Mõtsmees, Pille, 2013. "The Effect of Migration Experience on Occupational Mobility in Estonia," IZA Discussion Papers 7482, Institute of Labor Economics (IZA).
    4. Jaan Masso & Kerly Krillo, 2010. "Estonia, Latvia and Lithuania: Minimum Wages in a Context of Migration and Labour Shortages," Chapters, in: Daniel Vaughan-Whitehead (ed.), The Minimum Wage Revisited in the Enlarged EU, chapter 4, Edward Elgar Publishing.
    5. Kluve, Jochen & Fertig, Michael & Jacobi, Lena & Nima, Leonhard & Schaffner, Sandra & Schmidt, Christoph M. & Card, David & Góra, Marek & Jensen, Peter & Leetmaa, Reelika & Patacchini, Eleonora & van , 2005. "Study on the effectiveness of ALMPs: Research project for the European Commission, DG Employment, Social Affairs and Equal Opportunities. Final report," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 69929.
    6. Månsson, Jonas & Olsson, Mikael, 2010. "Mobility sans integration? An analysis of labor market attainment in Sweden among its post-war immigrants from Estonia, Latvia, Lithuania and Poland," CAFO Working Papers 2010:6, Linnaeus University, Centre for Labour Market Policy Research (CAFO), School of Business and Economics.
    7. Masso, Jaan & Staehr, Karsten, 2005. "Inflation dynamics and nominal adjustment in the Baltic States," Research in International Business and Finance, Elsevier, vol. 19(2), pages 281-303, June.
    8. Seppo Kari & Jouko Ylä-Liedenpohja, 2004. "Cost of Capital for Cross-Border Investment: The Fallacy of Estonia as a Tax Haven," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 5(1), pages 28-43, December.
    9. Raul Eamets, 2004. "Labour market flows and adjustment to macroeconomic shocks in the Baltic States," Post-Communist Economies, Taylor & Francis Journals, vol. 16(1), pages 47-71.
    10. Tiiu Paas, 2014. "Cross-border labour mobility: are East-West and East-East cross-border labour flows differ?," ERSA conference papers ersa14p50, European Regional Science Association.
    11. Kuokštis, Vytautas & Asali, Muhammad & Spurga, Simonas Algirdas, 2022. "Labor market flexibility and exchange rate regimes," European Journal of Political Economy, Elsevier, vol. 75(C).
    12. Tiiu Paas & Marit Hinnosaar & Jaan Masso & Orsolya Szirko, 2004. "Social Protection Systems In The Baltic States," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 26, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    13. Raul Eamets & Epp Kalaste, 2004. "The Lack of Wage Setting Power of Estonian Trade Unions?," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 5(1), pages 44-60, December.
    14. Tiiu Paas, 2003. "Social Consequences of Transition and European Integration Processes in the Baltic States," ERSA conference papers ersa03p382, European Regional Science Association.
    15. Jaan Masso & Kerly Espenberg, 2013. "Early application of fiscal austerity measures in the Baltic states," Chapters, in: Daniel Vaughan-Whitehead (ed.), Public Sector Shock, chapter 3, pages 84-133, Edward Elgar Publishing.
    16. Jaan Masso & K. Espenberg & Anu Masso & I. Mierina & Kaia Philips, 2013. "GINI Country Report: Growing Inequalities and their Impacts in the Baltic States Estonia, Latvia, Lithuania," GINI Country Reports baltics, AIAS, Amsterdam Institute for Advanced Labour Studies.

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