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Returns to Mobility in the transition to a Market Economy

By Tito Boeri and Christopher Flinn

Abstract

In spite of the ongoing dramatic changes in the structure of employment, transitional economies display rather low mobility across sectors, occupations and firms of different ownership. We characterise this low mobility of central and eastern European labour markets by computing mobility measures for transition matrices, the latter estimated on the basis of matched records across LFS waves. As low mobility can be explained by high costs of shifting jobs compared to the vbenefits one can get from the job change as well as by segmentation in the allocation of job offers, we develop an econometric model enabling to characterise intertemporal changes in probabilities of dismissal, remunerations and offer arrival rates on the basis of information only on observed transitions. This model is seminally implemented on matched data across various waves of the Polish LFS. Although our results are highly pre6liminary, they point to significant segmentation in the allocation of job offers, more stability in public sector versus private sector jobs, and little, if any, rewards to tenure and age in the private sector. Were these findings supported in further work, they could support explanations for low mobility in transitional ecnomies, which are based on informational failures, notably that fact that job offers do not reach those who are most prone to take up jobs, and on the fact that changing jobs and moving from public to private enterprises is costly especially for those with relatively long tenures and work records.

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