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.
Subject Editor
University of the West of England, UK, and IZA, Germany
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Do institutions matter for entrepreneurial development? Updated
In post-Soviet countries, well-functioning institutions are needed to foster productive entrepreneurial development and growth
Ruta Aidis, August 2023Since the collapse of the Soviet Union, the differing impact of institutions on entrepreneurship development is undeniable. Several post-Soviet countries benefitted from early international integration by joining the EU, adopting the euro, and becoming OECD members. This process enabled entrepreneurship to develop within institutional contexts where democratic and free market principles were strengthened. In general, however, post-Soviet economies continue to be characterized by higher levels of corruption, complex business regulations, weak rule of law, uncertain property rights and often, lack of political will for institutional change.MoreLess -
Public employment in the Middle East and North Africa
Does a changing public sector workforce in the MENA region provide an opportunity for efficient restructuring?
Ragui AssaadGhada Barsoum, August 2019Public sector hiring has been an essential component of the social bargains that have maintained political stability in the Middle East and North Africa (MENA). As these bargains eroded, public sector workforces contracted in relative terms owing to a partial freeze on hiring and the promise of lifetime job security for incumbent workers. This had profound effects on the age composition of the workforce. The upcoming retirement of many workers provides an opportunity to restructure public sector hiring to emphasize meritocratic recruitment processes and performance-based compensation systems.MoreLess -
Latent entrepreneurship in transition economies
Some entrepreneurs and would-be entrepreneurs face financial and bureaucratic barriers to starting a business
Hilal Atasoy, June 2015Because entrepreneurial activity can stimulate job creation and long-term economic growth, promoting entrepreneurship is an important goal. However, many financial, bureaucratic, and social barriers can short-circuit the process of actually starting a business, especially in transition economies that lack established institutional systems and markets. The main obstacles are underdeveloped financial markets, perceptions of administrative complexity, political and economic instability, and lack of trust in institutions. Gender disparities in the labor market are also reflected in less entrepreneurial activity among women than men.MoreLess -
Trade and labor markets: Lessons from China’s rise
The China Shock has challenged economists’ benign view of how trade integration affects labor markets in developed countries
David H. Autor, February 2018Economists have long recognized that free trade has the potential to raise countries’ living standards. But what applies to a country as a whole need not apply to all its citizens. Workers displaced by trade cannot change jobs costlessly, and by reshaping skill demands, trade integration is likely to be permanently harmful to some workers and permanently beneficial to others. The “China Shock”—denoting China’s rapid market integration in the 1990s and its accession to the World Trade Organization in 2001—has given new, unwelcome empirical relevance to these theoretical insights.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 stronger
Elizabeth 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 -
New firms entry, labor reallocation, and institutions in transition economies
In transition economies, better property rights protection and rule of law enforcement can boost job creation and growth
Randolph L. Bruno, September 2015In the transition from central planning to a market economy in the 1990s, governments focused on privatizing or closing state enterprises, reforming labor markets, compensating laid-off workers, and fostering job creation through new private firms. After privatization, the focus shifted to creating a level playing field in the product market by protecting property rights, enforcing the rule of law, and implementing transparent start-up regulations. A fair, competitive environment with transparent rules supports long-term economic growth and employment creation through the reallocation of jobs in favor of new private firms.MoreLess -
Determinants of inequality in transition countries
Market changes and limited redistribution contributed to high income and wealth inequality growth in Eastern Europe
Michal BrzezinskiKatarzyna Salach, June 2022High levels of economic inequality may lead to lower economic growth and can have negative social and political impacts. Recent empirical research shows that income and wealth inequalities in Eastern Europe since the fall of socialism increased significantly more than previously suggested. Currently, the average Gini index (a common measure) of inequality in Eastern Europe is about 3 percentage points higher than in the rest of Europe. This rise in inequality was initially driven by privatization, liberalization, and deregulation reforms, and, more recently, has been amplified by technological change and globalization coupled with relatively ungenerous income and wealth redistribution policies.MoreLess -
- Migration and ethnicity
- Labor markets and institutions
- Transition and emerging economies
- Development
Aggregate labor productivity
Labor productivity is generally seen as bringing wealth and prosperity; but how does it vary over the business cycle?
Michael C. Burda, April 2018Aggregate labor productivity is a central indicator of an economy’s economic development and a wellspring of living standards. Somewhat controversially, many macroeconomists see productivity as a primary driver of fluctuations in economic activity along the business cycle. In some countries, the cyclical behavior of labor productivity seems to have changed. In the past 20–30 years, the US has become markedly less procyclical, while the rest of the OECD has not changed or productivity has become even more procyclical. Finding a cogent and coherent explanation of these developments is challenging.MoreLess