Transition and emerging economies
The transformation of economic systems from plan to market in transition and emerging economies has significant consequences not just for labor markets in those countries. The articles in this section offer summary lessons that can guide the development of institutions and labor reform policies in such countries, while also having wider relevance for other economies.
Worker displacement in transition economies and in China
Knowing which workers are displaced in restructuring episodes helps governments devise the right equity- and efficiency-enhancing policiesHartmut Lehmann, May 2014Continuous enterprise restructuring is needed for the transition and emerging market economies to become and remain competitive. However, the beneficial effects of restructuring in the medium run are accompanied by large worker displacement. The costs of displacement can be large and long-lasting for some workers and for the economy. To devise the right policy interventions, governments need to fully understand which workers are displaced and what costs they bear.MoreLess
Can government policies reverse undesirable declines in fertility?
Government policies can have a modest effect on raising fertility—but broader social changes lowering fertility are strongerElizabeth Brainerd, May 2014Since 1989 fertility and family formation have declined sharply in Central and Eastern Europe and the former Soviet Union. Fertility rates are converging on—and sometimes falling below—rates in Western Europe, most of which are below replacement levels. Concerned about a shrinking and aging population and strains on pension systems, governments are using incentives to encourage people to have more children. These policies seem only modestly effective in countering the impacts of widespread social changes, including new work opportunities for women and stronger incentives to invest in education.MoreLess
Formalization of jobs and firms in emerging market economies through registration reform
Reforming registration might not be enough to persuade informal firms and workers to formalize—enforcement and other reforms may also be neededMelanie Khamis, May 2014Informal firms make up a major share of the economy in most developing countries. Expanding formalization could increase government tax revenues, boost firm profits and national income, and increase employee well-being by improving access to social security and health and workers’ benefits. Reforms to encourage firms to register include simplifying procedures, reducing the cost and time to register, and making more information available on registration procedures. Reforms might not result in higher registration and formalization. In some cases, better enforcement and wider development policies might be needed as well.MoreLess
Post-enlargement emigration and new EU members’ labor markets
Outmigration has contributed to increasing wages and decreasing unemployment in the new EU member states but may also cause skills shortagesAnzelika Zaiceva, August 2014The recent EU enlargements into Central and Eastern Europe and increased labor mobility within the Union provide a unique opportunity to evaluate the labor market effects of emigration. Outmigration has contributed to higher wages for stayers, as well as to lower unemployment in the source country. However, emigration has also exacerbated skills shortages in some sectors, as well as mismatches between skills and jobs.MoreLess
Employment protection legislation in transition and emerging markets
Although market failures mean employment protection is necessary, excessive protection can be counterproductiveAlexander Muravyev, September 2014Employment protection legislation aims to shield employees against unfair dismissal and earning reductions at the time of job loss. Theory suggests that employment protection stabilizes employment over cyclical upturns and downturns without necessarily increasing general unemployment. However, recent evidence from transition and emerging economies shows that employment protection legislation tends to raise unemployment among disadvantaged groups, particularly youth, and may increase informal work. Employment protection policies thus require careful consideration of their unintended effects.MoreLess
Flat-rate tax systems and their effect on labor markets
Despite their theoretical benefits, flat taxes have been tried only in a few formerly socialist countriesAndreas Peichl, October 2014The potential economic outcomes resulting from a flat rate of income tax have been the subject of an ongoing academic and political debate. Many observers have suggested that the introduction of a flat tax would be beneficial for a country’s economy, having a positive influence on the labor market and the gross domestic product by enhancing incentives to work, save, invest, and take risks. A flat tax also significantly simplifies income taxation which increases tax compliance and reduces tax planning, avoidance, and evasion. However, despite flat taxes being on the political agenda in many countries, in practice their implementation has mostly been restricted to the transition economy countries of Eastern Europe. There is no one single flat tax system in place in these countries though; one rate does not fit all.MoreLess