2003/23 | LEM Working Paper Series | |
Speed of Transition, Unemployment Dynamics and Nonemployment Policies: Evidence from the Visegrad Countries |
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Randolph Luca Bruno |
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Keywords | ||
Unemployment, Model of Transition, Social Safety Net
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JEL Classifications | ||
J41, H53, P26
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Abstract | ||
In Central and Eastern Europe the restructuring process of large
state enterprises had the effect of increasing unemployment.
Social policy expenditure, in particular nonemployment policies,
grew faster then expected due to the
need of financing the \textit{out of labor force} categories.
The interactions among unemployment, speed of transition and
nonemployment subsidies/pensions are studied taking into account
the shrinking labor
force during transition. The reallocation of workers
from the state to the private sector imposed a heavy burden on the
budget deficit due to the increased social policy expenditure. This
combination of effects is captured by a model of the speed of
transition, in which a non-constant labor force is considered as well as
the opposition of the insiders to restructuring is accounted for.
After the reforms of the so-called Passive Labor Market Policies
(PLMPs) at the beginning of 1992, there was a slowing down of the
transition and this is has not been yet completely explained by the
Optimal Speed of Transition (OST) literature.
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