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Active labor market policies in the OECD and in selected transition economies

  • Lehmann, Hartmut

Transition economies have introduced a range of OECD active labor market policies to combat unemployment - albeit often on paper only, as with rising unemployment passive policies have crowded out active ones. But even in the Czech Republic, active labor market policies have contributed only marginally to reducing unemployment. One task for policymakers in Central and Eastern Europe must be to conveythe message that, even under the best circumstances, active labor policies can play only a marginal role in reducing unemployment. OECD labor policies cannot be applied mechanically in Central and Eastern Europe because the situation there is different. Severe and persistent shortages in capital and managerial ability are sure to keep labor demand weak in the medium term, while labor supply will be abundant. As enterprises are restructured and liquidated, the newly unemployed workers cannot be absorbed by the weak private sector and must compete for scarce jobs. Women and older, less educated men have particular trouble finding work. Which active labor policies does the author suggest might be effective? Limited funds for active labor policies might best be spent retraining the most able unemployed workers to develop skills needed in the private sector. Public employment programs might be targeted especially to problem groups of workers and to the long-term unemployed - more for reasons of equity than of efficiency. The point is to have a clear idea whether both aims of efficiency and equity can be pursued and, if efficiency gains are unrealistic, whether equity considerations are politically indispensable. Because nontradable services are underdeveloped, Central and Eastern European countries might eliminate credit rationing that discourages self-employment (the self-employed have trouble getting financing). Improving consulting services for the unemployed in Hungary, Poland, and Russia makes more sense than applying a broad menu of OECD programs. The labor market in the Russian Federation appears to be more dynamic than in Hungary and Poland, but this is probably because of massive labor hoarding in Russian enterprises. Once they start shedding labor in earnest, their employment figures will look more like those in the other Central and Eastern European countries.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1502.

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Date of creation: 31 Aug 1995
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Handle: RePEc:wbk:wbrwps:1502
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  1. Guy Standing & T. Chetvernina, 1994. "Enigmas of Russian Unemployment: (Based on Surveys of Employment Centers in Leningrad Oblast)," Problems of Economic Transition, M.E. Sharpe, Inc., vol. 37(7), pages 3-15, November.
  2. Bellmann Lutz & Estrin Saul & Lehmann Hartmut & Wadsworth Jonathan, 1995. "The Eastern German Labor Market in Transition: Gross Flow Estimates from Panel Data," Journal of Comparative Economics, Elsevier, vol. 20(2), pages 139-170, April.
  3. Orley Ashenfelter & David Card, 1984. "Using the Longitudinal Structure of Earnings to Estimate the Effect of Training Programs," Working Papers 554, Princeton University, Department of Economics, Industrial Relations Section..
  4. Peter Jäckel, 1994. "Neue Bundesländer : weiterer Anstieg der Industrieinvestitionen," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 47(24), pages 11-15, October.
  5. Haskel, Jonathan & Jackman, Richard, 1988. "Long-term Unemployment in Britain and the Effects of the Community Programme," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 50(4), pages 379-408, November.
  6. Burda, Michael C & Funke, Michael, 1993. "Eastern Germany: Can't We Be More Optimistic?," CEPR Discussion Papers 863, C.E.P.R. Discussion Papers.
  7. Burda, Michael C & Lubyová, Martina, 1995. "The Impact of Active Labour Market Policies: A Closer Look at the Czech and Slovak Republics," CEPR Discussion Papers 1102, C.E.P.R. Discussion Papers.
  8. Burda, Michael C, 1992. "Unemployment, Labour Market Institutions and Structural Change in Eastern Europe," CEPR Discussion Papers 746, C.E.P.R. Discussion Papers.
  9. Steiner, Viktor & Kwiatkowski, Eugeniusz, 1995. "The Polish labour market in transition," ZEW Discussion Papers 95-03, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  10. M Schaffer, 1994. "Government Financial Transfers and Enterprise Adjustments in Russia," CEP Discussion Papers dp0191, Centre for Economic Performance, LSE.
  11. Toikka, Richard S, 1976. "A Markovian Model of Labor Market Decisions by Workers," American Economic Review, American Economic Association, vol. 66(5), pages 821-34, December.
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