This paper discusses employment policy in the transitional economies of Central and Eastern Europe. It argues that unemployment has arisen as a consequence of economy-wide shocks rather than as part of the process of reallocation of labour between sectors. Hence policies such as tax-based incomes policy, to restrain wage growth, and selective financial support of enterprises can slow down the inflow into unemployment without impeding the process of restructuring. Likewise active labour market policies can be most successful if aimed at direct job creation rather than at improving labour mobility across sectors
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