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Labor market responses to a change in economic system (English)

The economic transitions in Eastern Europe have produced a contraction in the aggregate labor supply and the beginnings of a reallocation of labor from investment goods and heavy industry to consumer goods and services. The expansion of the private sector has reversed - if not eliminated - many of the labor market distortions created under central planning. Thus the first years of economic transition recorded increasing returns to human capital. There is some evidence that growth in the private sector has led to more rational wage structures. Labor unions and minimum wage legislation have done little to inhibit labor market adjustments. Rather, labor market programs and incomes policies - with their emphasis on passive measures and wage subsidies - have retarded the adjustment of wage structures and the restructuring of labor in state enterprises. But, the article observes, changing to active labor policies would probably not reverse the decline in employment. Unemployment in the transition economies is largely a matter of insufficient demand, and labor market policy is unlikely to have much impact until the mismatch between vocational training systems and modern production methods is solved.

Details

  • Author

    Flanagan, Robert J.

  • Document Date

    1995/03/31

  • Document Type

    Publication

  • Report Number

    14438

  • Volume No

    1

  • Total Volume(s)

    1

  • Disclosure Date

    2010/07/01

  • Doc Name

    Labor market responses to a change in economic system

  • Keywords

    Income policies;income policy;state sector;state enterprises;Minimum Wage Policy;commission of the european communities;labor market policy;wage structure;aggregate labor market;central planning;transition economy;Transition economies;labor market program;returns to schooling;graduate school of business;active labor market policy;Active Labor Market Policies;total factor productivity growth;higher returns to education;female labor force participation;average rate of return;human capital earnings function;bureau of economic;distortions in labor market;private sector wage policy;Human Resource Management System;market economy;Wage Bill;average wage;aggregate labor supply;hard budget constraint;soft budget constraint;Wage Subsidies;wage subsidy;relative wage;central planner;economies in transition;allocation of labor;human capital formation;duration of unemployment;centrally planned economy;labor market competition;university education;real wage decline;indigenous private sector;labor supply elasticity;private economic activity;private sector employment;organization of work;high minimum wages;labor market distortion;source of employment;labor reallocation process;security of employment;state sector worker;rates of return;labor market adjustment;human capital investment;difference in returns;high school education;human capital development;return to education;employer having;central planning process;labor market behavior;industry and trade;lack of employment opportunities;labor market institution;labor force survey;economic growth rate;unemployment insurance system;high unemployment rate;private sector job;early retirement incentive;managers of state;private sector expansion;government tax revenue;incentive for compliance;lack of incentive;form of tax;advanced industrial country;trade and services;central planning system;form of remuneration;excessive wage increase;vocational training system;average monthly wage;active labor policy;wage differential;

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Citation

Flanagan, Robert J.

Labor market responses to a change in economic system (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/572631468764741872/Labor-market-responses-to-a-change-in-economic-system