Economic Restructuring, Unemployment, and Growth in a Transition Economy

By Kornelia Krajnyak, Bankim Chadha, Fabrizio Coricelli

March 1, 1993

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Kornelia Krajnyak, Bankim Chadha, and Fabrizio Coricelli. Economic Restructuring, Unemployment, and Growth in a Transition Economy, (USA: International Monetary Fund, 1993) accessed October 6, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper develops a model of the process of reallocation of labor from the state sector to the private sector. When growth is exogenously determined, we show that in the initial stages of transition unemployment will rise over time. After a critical stage in the transition process, restructuring is accompanied by a decline in unemployment. When growth is endogenously determined, and human capital is acquired by learning-by-doing, we show that whether restructuring eventually occurs is determined by the level of human capital in the private sector and the rate of unemployment. The effects of various shocks and government policies in affecting the costs, speed, and eventual outcome of restructuring are analyzed.

Subject: Economic sectors, Employment, Human capital, Labor, Public sector, Unemployment, Unemployment rate

Keywords: Central and Eastern Europe, Employment, Employment decision, Employment in the private sector, Human capital, Private sector activity, Private sector employment, Private sector good, Private sector wage, Public sector, UH curve, Unemployment, Unemployment rate, WP

Publication Details

Pages:

49
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1993/016
Stock No:

WPIEA0161993
ISBN:

9781451843323
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 40, No. 4, December 1993.

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