{
  "title": "Wage Controls and Employment in a Socialist Economy",
  "publication": "IMF Working Papers, November 1, 1991",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/wage-controls-and-employment-in-a-socialist-economy-986",
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  "summary": "Wage controls have been an important element of several of the stabilization programs recently introduced in reforming socialist economies. In some cases, the controls have been placed on each state enterprise’s total wage bill, rather than on the wage rate paid.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Wage controls have been an important element of several of the stabilization programs recently introduced in reforming socialist economies.\n- In some cases, the controls have been placed on each state enterprise’s total wage bill, rather than on the wage rate paid.\n- Such an incomes policy would be expected to have a dampening effect on employment, but this has not generally occurred; on the contrary, declines in employment in state enterprises have typically been much less than the associated declines in output.\n- This paper presents a simple model of a labor-managed enterprise which offers an explanation of the behavior of wages and employment under such an incomes policy."
    },
    {
      "heading": "Key findings and observations",
      "content": "- Wage-bill controls (controls on each state enterprise’s total wage bill) differ from wage-rate controls and have distinct labor-market effects.\n- Empirical pattern: declines in employment in state enterprises have typically been much less than the associated declines in output under incomes policies.\n- A model of a labor-managed enterprise can explain observed behavior of wages and employment when wage-bill constraints are imposed."
    },
    {
      "heading": "Analytical approach",
      "content": "- The paper develops a simple model of a labor-managed enterprise to analyze:\n  - how wage-bill constraints affect the employment decision of labor-managed firms;\n  - the interaction between output declines and employment responses under incomes policies."
    },
    {
      "heading": "Policy implications",
      "content": "- Incomes policies that constrain total wage bills do not necessarily translate into proportional employment reductions; employment declines can be smaller than output declines.\n- Understanding firm ownership/management structure (labor-managed vs. socialized vs. privatized) is critical for predicting labor-market outcomes under wage controls."
    },
    {
      "heading": "Subjects and keywords",
      "content": "- Subject: Employment, Expenditure, Income, Labor, Labor markets, National accounts, Unemployment benefits, Wages\n- Keywords: bill constraint, Central and Eastern Europe, Employment, employment decision, Income, incomes policy, Labor markets, labor-managed firm, privatized firm, profit contour, socialized firm, Unemployment benefits, wage control, Wages, WP\n\n---\n\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/wage-controls-and-employment-in-a-socialist-economy-986"
    }
  ],
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    "Authors: Timothy D. Lane",
    "Published: November 1, 1991",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451853384.001",
    "Wage controls have been an important element of several of the stabilization programs recently introduced in reforming socialist economies.",
    "In some cases, the controls have been placed on each state enterprise’s total wage bill, rather than on the wage rate paid.",
    "Such an incomes policy would be expected to have a dampening effect on employment, but this has not generally occurred; on the contrary, declines in employment in state enterprises have typically been much less than the associated declines in output.",
    "This paper presents a simple model of a labor-managed enterprise which offers an explanation of the behavior of wages and employment under such an incomes policy.",
    "Wage-bill controls (controls on each state enterprise’s total wage bill) differ from wage-rate controls and have distinct labor-market effects.",
    "Empirical pattern: declines in employment in state enterprises have typically been much less than the associated declines in output under incomes policies.",
    "A model of a labor-managed enterprise can explain observed behavior of wages and employment when wage-bill constraints are imposed.",
    "The paper develops a simple model of a labor-managed enterprise to analyze:",
    "Incomes policies that constrain total wage bills do not necessarily translate into proportional employment reductions; employment declines can be smaller than output declines.",
    "Understanding firm ownership/management structure (labor-managed vs. socialized vs. privatized) is critical for predicting labor-market outcomes under wage controls.",
    "Subject: Employment, Expenditure, Income, Labor, Labor markets, National accounts, Unemployment benefits, Wages",
    "Keywords: bill constraint, Central and Eastern Europe, Employment, employment decision, Income, incomes policy, Labor markets, labor-managed firm, privatized firm, profit contour, socialized firm, Unemployment benefits, wage control, Wages, WP"
  ],
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