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Skill Acquisition and Private Firm Creation in Transition Economies

  • Zuzana Brixiova
  • Wenli Li

This paper studies relation between availability of skilled workers and creation of private firms in transition economies using a dynamic general equilibrium model. It shows how the lack of skilled workers lowers the rate of Creation of private firms by increasing wages and hence lowering profitability of these firms. The lower number of private firms leads to a shift of the labor force into the informal sector and slows the recovery of the aggregate output and labor productivity. The paper also demonstrates how policies that discourage skill acquisition by workers, such as excess wage taxation and ad hoc cuts in expenditures for education, have a negative impact on the economy.

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Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 162.

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Length: pages
Date of creation: 01 Jun 1998
Date of revision:
Handle: RePEc:wdi:papers:1998-162
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  1. Wyznikiewicz, B. & Pinto, B. & Grabowski, M., 1993. "Coping with Capitalism; The new Polish Entrepreneurs," Papers 18, World Bank - International Finance Corporation.
  2. Andrew Atkeson & Patrick J. Kehoe, 1995. "Industry evolution and transition: measuring investment in organization," Staff Report 201, Federal Reserve Bank of Minneapolis.
  3. A. Richter & M.E. Schaffer, 1996. "The Performance of De Novo Private Firms in Russian Manufacturing," CERT Discussion Papers 9610, Centre for Economic Reform and Transformation, Heriot Watt University.
  4. Wenli Li, 1997. "Entrepreneurship and government subsidies under capital constraints: a general equilibrium analysis," Working Paper 97-09, Federal Reserve Bank of Richmond.
  5. Blanchard, Olivier Jean & Aghion, Philippe, 1994. "On the Speed of Transition in Central Europe," Scholarly Articles 4481322, Harvard University Department of Economics.
  6. Kornélia Krajnyák & Bankim Chadha & Fabrizio Coricelli, 1993. "Economic Restructuring, Unemployment, and Growth in a Transition Economy," IMF Working Papers 93/16, International Monetary Fund.
  7. Hartmut Lehmann & Patrick Paul Walsh, 1999. "Gradual restructuring and Structural Unemployment in Poland. A Legacy of Central Planning," LICOS Discussion Papers 7899, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  8. Ernesto Hernández-Catá, 1997. "Liberalization and the Behavior of Output During the Transition From Plan to Market," IMF Working Papers 97/53, International Monetary Fund.
  9. Kluve, Jochen & Lehmann, Hartmut & Schmidt, Christoph M, 1999. "Active Labour Market Policies in Poland: Human Capital Enhancement, Stigmatization or Benefit Churning?," CEPR Discussion Papers 2059, C.E.P.R. Discussion Papers.
  10. Snower, Dennis J., 1994. "The Low-Skill, Bad-Job Trap," CEPR Discussion Papers 999, C.E.P.R. Discussion Papers.
  11. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  12. Brixiova, Zuzana & Kiyotaki, Nobuhiro, 1997. "Private sector development in transition economies," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 46(1), pages 241-279, June.
  13. J. Stiglitz, 1999. "Whither Reform? Ten Years of the Transition," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 7.
  14. Green Edward J., 1993. "Privatization, the Entrepreneurial Sector, and Growth in Post-Comecon Economies," Journal of Comparative Economics, Elsevier, vol. 17(2), pages 407-417, June.
  15. Giulia Faggio & Jozef Konings, 1998. "Gross Job Flows in Transition Countries: Results from Company Accounts Data for Bulgaria, Estonia and Romania," LICOS Discussion Papers 7798, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  16. Barro, Robert J., 1992. "Human capital and economic growth," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 199-216.
  17. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
  18. Ernesto Hernández-Catá, 1997. "Liberalization and the Behavior of Output during the Transition from Plan to Market," IMF Staff Papers, Palgrave Macmillan, vol. 44(4), pages 405-429, December.
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