IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/4810.html
   My bibliography  Save this paper

Unemployment and Worker-Firm Matching Theory and Evidence from East and West Europe

Author

Listed:
  • Munich, Daniel

    (University of Michigan,)

  • Svejnar, Jan

    (University of Michigan,)

Abstract

The paper tests three hypotheses about the causes of unemployment in the Central-East European transition economies and in a benchmark market economy (Western part of Germany). The first hypothesis (H1) is that unemployment is caused by inefficient matching. Hypothesis 2 (H2) is that unemployment is caused by low demand. Hypothesis 3 (H3) is that restructuring is at work. Our estimates suggest that the west and east German parts of Germany, Czech Republic and Slovakia are consistent with H2 and H3. Hungary provides limited support to all three hypotheses. Poland is consistent with H1. The economies in question hence contain one broad group of countries and one or two special cases. The group comprises the Czech Republic, Hungary, Slovak Republic and (possibly) East Germany. These countries resemble West Germany in that they display increasing returns to scale in matching and unemployment appears to be driven by restructuring and low demand. The East German case is complex because of its major active labor market policies and a negative trend in efficiency in matching. In some sense, East Germany resembles more Poland, which in addition to restructuring and low demand for labor appears to suffer from a structural mismatch reflected in relatively low returns to scale in matching. Finally, our data provide evidence that goes counter to one of the main predictions of the theories of transition, namely that the turnover (inflow) rate in the transition countries would rise dramatically at the start of the transition, be temporarily very high and gradually decline and approach the level observed in otherwise similar market economies such as West Germany.

Suggested Citation

  • Munich, Daniel & Svejnar, Jan, 2009. "Unemployment and Worker-Firm Matching Theory and Evidence from East and West Europe," Policy Research Working Paper Series 4810, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4810
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2009/01/07/000158349_20090107090518/Rendered/PDF/WPS4810.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Karel Dyba & Jan Svejnar, 1994. "Stabilization and Transition in Czechoslovakia," NBER Chapters, in: The Transition in Eastern Europe, Volume 1, Country Studies, pages 93-122, National Bureau of Economic Research, Inc.
    2. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    3. Suits, Daniel B & Mason, Andrew & Chan, Louis, 1978. "Spline Functions Fitted by Standard Regression Methods," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 132-139, February.
    4. Coles, Melvyn G & Smith, Eric, 1998. "Marketplaces and Matching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 239-254, February.
    5. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
    6. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
    7. Schaffer, Mark E, 1995. "Government Subsidies to Enterprises in Central and Eastern Europe: Budgetary Subsidies and Tax Arrears," CEPR Discussion Papers 1144, C.E.P.R. Discussion Papers.
    8. Boeri, Tito & Burda, Michael C., 1996. "Active labor market policies, job matching and the Czech miracle," European Economic Review, Elsevier, vol. 40(3-5), pages 805-817, April.
    9. Warren, Ronald Jr., 1996. "Returns to scale in a matching model of the labor market," Economics Letters, Elsevier, vol. 50(1), pages 135-142, January.
    10. Storer, P, 1994. "Unemployment Dynamics and Labour Market Tightness: An Empirical Evaluation of Matching Function Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(4), pages 389-419, Oct.-Dec..
    11. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2007. "Technology—Policy Interaction in Frictional Labour-Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(4), pages 1089-1124.
    12. Profit, Stefan, 1997. "Twin peaks in regional unemployment and returns to scale in job-matching in the Czech Republic," SFB 373 Discussion Papers 1997,63, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    13. Ham, John C & Svejnar, Jan & Terrell, Katherine, 1998. "Unemployment and the Social Safety Net during Transitions to a Market Economy: Evidence from the Czech and Slovak Republics," American Economic Review, American Economic Association, vol. 88(5), pages 1117-1142, December.
    14. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
    15. Holtz-Eakin, Douglas, 1988. "Testing for individual effects in autoregressive models," Journal of Econometrics, Elsevier, vol. 39(3), pages 297-307, November.
    16. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    17. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    18. 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.
    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. Iva Tomić, 2014. "Regional matching (in)efficiency on the Croatian labour market," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 64(3), pages 287-312, September.
    2. Joanna Tyrowicz & Tomasz Jeruzalski, 2013. "(In)Efficiency of matching: the case of a post-transition economy," Economic Change and Restructuring, Springer, vol. 46(2), pages 255-275, May.
    3. Munich, Daniel & Svejnar, Jan, 2007. "Unemployment in East and West Europe," Labour Economics, Elsevier, vol. 14(4), pages 681-694, August.
    4. Francesco Pastore, 2012. "Primum vivere . . . industrial change, job destruction and the geographical distribution of unemployment," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-15, December.
    5. Iva Tomic, 2012. "The Efficiency of the Matching Process: Exploring the Impact of Regional Employment Offices in Croatia," Working Papers 1204, The Institute of Economics, Zagreb.
    6. Pastore, Francesco, 2013. "Primum vivere… Industrial Change, Job Destruction and the Geographical Distribution of Unemployment," IZA Discussion Papers 7126, Institute of Labor Economics (IZA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daniel Munich & Jan Svejnar & Katherine Terrell, 2001. "Worker-firm Matching and Unemployment in Transition to a Market," Development and Comp Systems 0012011, University Library of Munich, Germany.
    2. Profit, Stefan, 1997. "Twin peaks in regional unemployment and returns to scale in job-matching in the Czech Republic," SFB 373 Discussion Papers 1997,63, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    3. Stefan Profit & Stefan Sperlich, 2004. "Non-uniformity of job-matching in a transition economy - A nonparametric analysis for the Czech Republic," Applied Economics, Taylor & Francis Journals, vol. 36(7), pages 695-714.
    4. Hujer, Reinhard & Zeiss, Christopher, 2006. "Macroeconomic Effects of Short-Term Training Measures on the Matching Process in Western Germany," IZA Discussion Papers 2489, Institute of Labor Economics (IZA).
    5. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    6. Jekaterina Dmitrijeva & Mihails Hazans, 2007. "A Stock–Flow Matching Approach to Evaluation of Public Training Programme in a High Unemployment Environment," LABOUR, CEIS, vol. 21(3), pages 503-540, September.
    7. René Fahr & Uwe Sunde, 2002. "On the Effects of Career Choice: Matching Efficiency of Different Occupations and Education Levels," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B1-1, International Conferences on Panel Data.
    8. Yashiv, Eran, 2007. "Labor search and matching in macroeconomics," European Economic Review, Elsevier, vol. 51(8), pages 1859-1895, November.
    9. Pablo de Pedraza, 2008. "Labour Market Matching Efficiency In The Czech Republic Transition," William Davidson Institute Working Papers Series wp920, William Davidson Institute at the University of Michigan.
    10. Burgess, Simon & Profit, Stefan, 2001. "Externalities in the matching of workers and firms in ritain," Labour Economics, Elsevier, vol. 8(3), pages 313-333, June.
    11. Abid, Anis Bou & Drine, Imed, 2011. "Efficiency frontier and matching process on the labour market: Evidence from Tunisia," Economic Modelling, Elsevier, vol. 28(3), pages 1131-1139, May.
    12. Giammarioli, Nicola, 2003. "Indeterminacy and search theory," Working Paper Series 271, European Central Bank.
    13. repec:eee:labchp:v:3:y:1999:i:pb:p:2567-2627 is not listed on IDEAS
    14. Fahr, René & Sunde, Uwe, 2001. "Disaggregate Matching Functions," IZA Discussion Papers 335, Institute of Labor Economics (IZA).
    15. Kamil Galuscak & Daniel Munich, 2005. "Structural and Cyclical Unemployment: What Can We Derive from the Matching Function?," Working Papers 2005/02, Czech National Bank.
    16. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
    17. Tran Nhuan KIEN & Yoon HEO, 2009. "Impacts Of Trade Liberalization On Employment In Vietnam: A System Generalized Method Of Moments Estimation," The Developing Economies, Institute of Developing Economies, vol. 47(1), pages 81-103, March.
    18. Badi H. Baltagi & Chihwa Kao, 2000. "Nonstationary Panels, Cointegration in Panels and Dynamic Panels: A Survey," Center for Policy Research Working Papers 16, Center for Policy Research, Maxwell School, Syracuse University.
    19. Mohammad Ziaul Hoque & MD. Rabiul Islam & Mohammad Nurul Azam, 2013. "Board Committee Meetings and Firm Financial Performance: An Investigation of Australian Companies," International Review of Finance, International Review of Finance Ltd., vol. 13(4), pages 503-528, December.
    20. Bongsuk Sung & Myoung Shik Choi & Woo-Yong Song, 2019. "Exploring the Effects of Government Policies on Economic Performance: Evidence Using Panel Data for Korean Renewable Energy Technology Firms," Sustainability, MDPI, vol. 11(8), pages 1-19, April.
    21. Villalonga, Belen, 2004. "Intangible resources, Tobin's q, and sustainability of performance differences," Journal of Economic Behavior & Organization, Elsevier, vol. 54(2), pages 205-230, June.

    More about this item

    Keywords

    access to information; Active Employment; Active Employment Policy; active labor; active labor market; active labor market policies; active labor market programs; Active Labour; Active Labour Market;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • P20 - Political Economy and Comparative Economic Systems - - Socialist 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:wbk:wbrwps:4810. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.