IMF Working Papers

Labor Market Institutions and Unemployment Dynamics in Transition Economies

By Pietro Garibaldi, Zuzana Brixiova

October 1, 1997

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Pietro Garibaldi, and Zuzana Brixiova. Labor Market Institutions and Unemployment Dynamics in Transition Economies, (USA: International Monetary Fund, 1997) 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 studies interactions between labor market institutions and unemployment dynamics in transition economies. It presents a dynamic matching model in which state sector firms endogenously shed labor and private job creation takes time. Two main conclusions arises. First, higher unemployment benefits increase steady-state unemployment, and, during the transition, they reduce the fall in real wages and speed up closure of state enterprises. Second, higher minimum wages can theoretically speed up the elimination of state sector jobs without affecting steady-state unemployment. These results are broadly consistent with existing evidence on the dynamics of unemployment and real wages in transition economies.

Subject: Economic sectors, Expenditure, Labor, Minimum wages, Production, Productivity, Public sector, Real wages, Unemployment, Unemployment benefits

Keywords: Capital gain, CEE economy, Central and Eastern Europe, Job-worker pair, Labor market, Matching Models, Minimum wage, Minimum wages, Opportunity cost, Private sector, Private sector employment, Private sector job, Productivity, Public sector, Replacement ratio, Reservation productivity, Sector job, State sector job, Transition Economies, Unemployment, Unemployment benefits, Unemployment insurance system, Wage arrears, WP

Publication Details

  • Pages:

    46

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1997/137

  • Stock No:

    WPIEA1371997

  • ISBN:

    9781451930566

  • ISSN:

    1018-5941

Notes

Also published in Staff Papers, Vol. 45, No. 2, June 1998.