Skip to main content
Article thumbnail
Location of Repository

Job destruction, job creation and unemployment in transition countries: what can we learn?

By Giulia Faggio

Abstract

Sixteen years into the transition, the problem of high joblessness has not been solved. Of the three explanations commonly discussed (i.e. ongoing reallocation; finished reallocation with redundant labour; wrong choice of institutional framework), we concentrated on the ongoing reallocation hypothesis. We show that there is a negative correlation between job creation in the private sector and unemployment. We also show that long-term unemployment depends on current and past values of short-term unemployment and that this path-dependence fades away as soon as we reach time t-3. We interpret this result as an indication that the process of reallocation started at the beginning of the 1990s still influences today’s labour market. We address three components of the transition debate: shock therapy versus gradualism; privatization; and political change. Contrary to Godoy and Stiglitz (2006), we do not find gradualism superior to shock therapy in terms of private sector growth. In addition, we confirm that full privatization is positively associated with job destruction in the state sector. Finally, we show that during early years of democratization the state sector was dismantled more vigorously than in other periods

Topics: HD Industries. Land use. Labor
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Year: 2007
OAI identifier: oai:eprints.lse.ac.uk:19716
Provided by: LSE Research Online

Suggested articles

Citations

  1. 0 Adolfas Slezevicius lithuanian democratic labour party left semi-presidential
  2. 0 Andres Tarand socialist centre-left parliamentary
  3. 0 Estonia 0 Andrus Ansip Liberal Estonian Reform Party centre-right parliamentary
  4. 0 Estonia 0 Siim Kallas Liberal Estonian Reform Party centre-right parliamentary
  5. 0 Estonia Edgar Savisaar Estonian Centre Party centre-left
  6. 0 Gavril Dejeu Roman Democratic Convention centre-right semi-presidential
  7. 0 Lithuania 0 Algirdas Brazauskas Social Democratic Party centre-left semi-presidential
  8. 0 Lithuania 1 Algirdas Brazauskas Social Democratic Party centre-left semi-presidential
  9. 0 Lithuania 1 Rolandas Paksas Liberal Union centre-right semi-presidential
  10. 0 Ljze Peterle Christian Democrats centre-right parliamentary
  11. 0 Radu Vasile Roman Democratic Convention centre-right semi-presidential
  12. 0 Romania 0 Adrian Nastase Social Democratic Party centre-left semi-presidential
  13. 0 Romania 1 Adrian Nastase Social Democratic Party centre-left semi-presidential
  14. 0 Victor Ciorbea Roman Democratic Convention centre-right semi-presidential
  15. 0 Viktor Yanukovych Victor Yushchenko Bloc Out Ukraine centre-left semi-presidential
  16. 0 Viktor Yanukovych/ Mykola Azarov Victor Yushchenko Bloc Out Ukraine centre-left semi-presidential
  17. 0 Yevhen K. Marchuk Communikst Party of Ukraine left semi-presidential
  18. 0 Yulia Tymoshenko/ Yuriy Yekhanurov Victor Yushchenko Bloc Out Ukraine centre-left semi-presidential
  19. 1 Anatoliy Kinakh Victor Yushchenko Bloc Out Ukraine centre-left semi-presidential
  20. 1 Andrej Bajuk New Slovenia Christian People's Party centre-right parliamentary
  21. 1 Czechoslovakia Petr Pitahrt centre-right parliamentary
  22. 1 Ljze Peterle Christian Democrats centre-right parliamentary
  23. 1 Mart Laar Fatherland centre-right parliamentary
  24. 1 Tiit Vähi Estonian Coalition party centre-left parliamentary
  25. 1 Valdis Birkavs Latvian Way centre-right parliamentary
  26. 1 Victor Ciorbea Roman Democratic Convention centre-right semi-presidential 53
  27. 1 Victor Yanukovych Party of Regions centre-left semi-presidential Source: BBC News, Country Profiles and Political Timelines, various issues.
  28. Alex Bryson Accounting for Collective Action: Resource Acquisition and Mobilization doi
  29. Alex Bryson Union Organization in Great Britain Prepared for symposium for the doi
  30. Ananat Guy Michaels The Effect of doi
  31. Baldwin Frédéric Robert-Nicoud Entry and Asymmetric Lobbying: Why Governments Pick Losers doi
  32. Baldwin Frédéric Robert-Nicoud Offshoring: General Equilibrium Effects on Wages, Production and Trade doi
  33. Buiter Is Numérairology the Future of Monetary Economics? Unbundling numéraire and medium of exchange through a virtual currency and a shadow exchange rate doi
  34. Chain Indices of the Cost of Living and the PathDependence Problem: an Empirical Solution doi
  35. Christoph Thoenissen Consumption and Real Exchange Rates with Incomplete Markets and Non-Traded Goods doi
  36. Conflict-Induced Displacement and Labour Market Outcomes: Evidence from Post-War Bosnia and Herzegovina doi
  37. (2003). Czech Republic New Sector Jurajda & Terrell
  38. (2005). Do Low Corporate Income Tax Rates Attract FDI? Evidence from Eight Central- and East European Countries’, doi
  39. Estonian Statistical Office;
  40. Federal State Statistics Service;
  41. (2003). Foreign Korosi (2001) 1991-2002 Latvia Foreign Amadeus 1996-2003 Lithuania Foreign Amadeus 1998-2003 Poland Foreign Amadeus 1994-2003 Romania Foreign Korosi and Turlea
  42. (2006). Gross Job Flows in Russian Industry Before and After Reforms: Has Destruction Become More Creative?’, doi
  43. Guy Mayraz Stephen Nickell The Marginal Utility of Income doi
  44. Haskel Information Technology, Organisational Change and Productivity Growth: Evidence from UK Firms 782 Paul Castillo Carlos Montoro Vicente Tuesta Inflation Premium and Oil Price Volatility
  45. Haskel Matthew Slaughter Productivity Growth, Knowledge Flows and Spillovers doi
  46. Job destruction and job creation rates in the old sector doi
  47. (2003). Korosi
  48. Mark Schankerman Harnessing Success: doi
  49. Monetary Policy Committees and Interest Rate Smoothing
  50. Nicola Gennaioli Economics and Politics of Alternative Institutional Reforms doi
  51. Note: All estimations include country and calendar time or transition time dummies. Privatization dummies are full privatization dummy, mass privatization dummy and mixed privatization dummy: mixed privatization dummy is the benchmark in column (2).
  52. Note: All estimations include country and transition time dummies. Estimates are equivalent to fixed-effects estimates. 36 Table 9: The relationship between unemployment, privatization, and political change
  53. Note: All estimations include country and transition time dummies. Estimates are equivalent to fixed-effects estimates. Privatization dummies are full privatization, mass privatization and mixed privatization; the benchmark being mixed privatization.
  54. Note: Figures for 2005 are estimates. Source: EBRD, Transition Report (various issues), and ILO, Key Labour Market Indicators database. Panel B: Long-term unemployment rate (in per cent): unemployed for more than 1y
  55. Note: Results of estimation of: ∆log(UNA)t =α+ δ0 log(UA, t)
  56. (2006). Organisation for Economics Co-operation
  57. Overman Diego Puga Matthew A. Turner Decomposing the Growth doi
  58. (2000). Policy Reform and Growth in Post-Soviet Russia’,
  59. Raffaella Sadun John Van Reenen Americans do doi
  60. Richard Belfield Salima Benhamou Inventive Pay Systems and the Management of Human Resources in France and doi
  61. Roberta Zizza Does the Underground Economy Hold Back Financial Deepening? Evidence from the Italian Credit Market doi
  62. (2003). Romania Korosi and Turlea
  63. Sanchari Roy Culture Clash or Culture Club? The Identity and Attitudes of Immigrants doi
  64. Schott Multi-Product Firms and Trade Liberalization doi
  65. (2003). Source: Amadeus data base. Note: the shares for Bulgaria and Poland are derived by using the Amadeus October
  66. Source: ILO, Key Labour Market Indicators database.
  67. (2005). Statistics Committee of Ukraine. The Corporate Tax Rates were constructed using the following sources:
  68. Sturm Term Limits and Electoral Accountability doi
  69. Table 1 Panel A: Unemployment rate (end-year) in per cent of labour force doi
  70. Table 10: The relationship between unemployment, privatization and the ‘speed’ and ‘level’ of reform Log(Unemployment)
  71. Table 2: Inactivity rates (in per cent) Panel A: 15-64 year old males and females
  72. Table A.3: Share of foreign-owned firms in total firms, Amadeus data base
  73. (1993). Table D.1: Country Privatization Nomenclature Country Classification of Privatization Year of Privatization Primary Method Secondary Method Bulgaria Full
  74. The Effect of Trade on the Demand for Skill – Evidence from the Interstate Highway System doi
  75. The Plant Size-Effect: Agglomeration and Monopsony in Labour Markets doi
  76. (2003). Ukraine Foreign Amadeus 1999-2003 Russia Foreign Amadeus 1999-2003 Table A.2: Job Destruction in the Old Sector: Data Sources Country Data source Time period Bulgaria Markov and Dobrinsky
  77. Uncertainty and the Dynamics of R&D doi
  78. (2002). What Drives the Speed of Job Reallocation during Episodes of Massive Adjustment?’, William Davidson Institute Discussion doi
  79. Why Has the British National Minimum Wage Had Little or No Impact on Employment? doi
  80. (2003). Worker Flows, Job Flows and Firm Wage Policies: an Analysis of Slovenia’, doi
  81. (1992). year jc_new jd_new Source = Amadeus foreign-owned firms. LATVIA Job creation and job destruction rates in the new sector
  82. (1992). year jc_new jd_new Source = Amadeus foreign-owned firms. LITHUANIA Job creation and job destruction rates in the new sector
  83. (1992). year jc_new jd_new Source = Amadeus foreign-owned firms. POLAND Job creation and job destruction rates in the new sector
  84. (1992). year jc_new jd_new Source = Amadeus foreign-owned firms. RUSSIA Job creation and job destruction rates in the new sector
  85. (1992). year jc_new jd_new Source = Amadeus foreign-owned firms. UKRAINE Job creation and job destruction rates in the new sector
  86. (1992). year jc_new jd_new Source = Jurajda and Terrell
  87. (1992). year jc_new jd_new Source = Korosi and Turlea
  88. (1992). year jc_new jd_new Source = Korosi(2005). HUNGARY Job creation and job destruction rates in the new sector
  89. (1992). year jc_new jd_new Source: Jurajda and Terrell
  90. (1992). year jc_new jd_new Source: Markov and Dobrinsky
  91. (1992). year jd_state jc_state Source:
  92. (1992). year jd_state jc_state Source: Amadeus firms. LATVIA Job destruction and job creation rates in the old sector
  93. (1992). year jd_state jc_state Source: Amadeus firms. LITHUANIA Job destruction and job creation rates in the old sector
  94. (1992). year jd_state jc_state Source: Brown and Earle(2002). RUSSIA Job destruction and job creation rates in the old sector
  95. (1992). year jd_state jc_state Source: Haltwanger and Vodopivec
  96. (1992). year jd_state jc_state Source: Jurajda and Terrell
  97. (1992). year jd_state jc_state Source: Konings and Bojnec(1998) and Amadeus firms. SLOVENIA Job destruction and job creation rates in the old sector
  98. (1992). year jd_state jc_state Source: Konings Lehmann and Schaffer(1996) and Amadeus state-owned firms. POLAND Job destruction and job creation rates in the old sector
  99. (1992). year jd_state jc_state Source: Korosi and Turlea
  100. (1992). year jd_state jc_state Source: Korosi(2005). HUNGARY Job destruction and job creation rates in the old sector
  101. (1992). year jd_state jc_state Source: Markov and Dobrinsky

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.