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

Faggio, Giulia (2007) Job destruction, job creation and unemployment in transition countries: what can we learn? CEPDP, 798. Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 9780853281740

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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.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk
Additional Information: © 2007 Giulia Faggio
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J64 - Unemployment: Models, Duration, Incidence, and Job Search
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J63 - Turnover; Vacancies; Layoffs
P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P20 - General
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 798
Date Deposited: 21 Jul 2008 10:16
URL: http://eprints.lse.ac.uk/19716/

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