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How Estonia's economic transition affected employment and wages (1989-95)

  • Noorkoiv, Rivo
  • Orazem, Peter F.
  • Puur, Allan
  • Vodopivec, Milan

The authors use a retrospective survey of 9,608 individuals, aged 16 to 75, to monitor the effects of Estonia's economic transition on wages and employment. Estonia is an interesting case because of its early adoption of relatively free labor market policies. Estonia's transition led to rapid increases in returns to human capital. Relative wages for the most educated workers rose for all age groups. There were also rapid increases in returns to job experience, especially for younger workers, but declining returns to experience for older workers with little education. Wage dispersion increased across groups categorized for human capital but narrowed within those groups (consistent with the predicted effect of labor mobility on wages for comparably skilled workers). Women lost relative share of employment in most sectors but experienced increasing relative wages. Immigrants lost in both employment and fell in shrinking sectors. Those results were consistent with mobile labor responses to demand shocks, suggesting that mechanisms for equilibrating the labor market developed very rapidly in Estonia.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1837.

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Date of creation: 31 Oct 1997
Date of revision:
Handle: RePEc:wbk:wbrwps:1837
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  1. Edward J. Bird & Johannes Schwarze & Gert G. Wagner, 1994. "Wage Effects of the Move toward Free Markets in East Germany," ILR Review, Cornell University, ILR School, vol. 47(3), pages 390-400, April.
  2. Chase, R.S., 1995. "Women's Labor Force Participation During and After Communism: A Case Study of the Czech Republic and Slovakia," Papers 768, Yale - Economic Growth Center.
  3. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
  4. Orazem, Peter F & Vodopivec, Milan, 1995. "Winners and Losers in Transition: Returns to Education, Experience, and Gender in Slovenia," World Bank Economic Review, World Bank Group, vol. 9(2), pages 201-30, May.
  5. Alan B. Krueger & Jorn-Steffen Pischke, 1992. "A Comparative Analysis of East and West German Labor Markets: Before and After Unification," NBER Working Papers 4154, National Bureau of Economic Research, Inc.
  6. H Lehmann, 1993. "Labour Market Flows and the Evaluation of Labour Market Policies in Poland," CEP Discussion Papers dp0161, Centre for Economic Performance, LSE.
  7. John Ham & Jan Svejnar & Katherine Terrell, 1993. "The Emergence of Unemployment in the Czech and Slovak Republics*," Comparative Economic Studies, Palgrave Macmillan, vol. 35(4), pages 121-134, December.
  8. Topel, Robert H, 1983. "On Layoffs and Unemployment Insurance," American Economic Review, American Economic Association, vol. 73(4), pages 541-59, September.
  9. Jan Rutkowski, 1996. "High skills pay off: the changing wage structure during economic transition in Poland," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(1), pages 89-112, 05.
  10. Schultz, Theodore W, 1975. "The Value of the Ability to Deal with Disequilibria," Journal of Economic Literature, American Economic Association, vol. 13(3), pages 827-46, September.
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