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.

  • The Chinese labor market, 2000–2016

    The world’s second largest economy has boomed, but a rapidly aging labor force presents substantial challenges

    Junsen ZhangJia Wu, May 2018
    China experienced significant economic progress over the past few decades with an annual average GDP growth of approximately 10%. Population expansion has certainly been a contributing factor, but that is now changing as China rapidly ages. Rural migrants are set to play a key role in compensating for future labor shortages, but inequality is a major issue. Evidence shows that rural migrants have low-paying and undesirable jobs in urban labor markets, which points to inefficient labor allocation and discrimination that may continue to impede rural–urban migration.
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  • 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 shortages

    Anzelika Zaiceva, August 2014
    The 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.
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  • Alcoholism and mortality in Eastern Europe

    Excessive drinking is the main cause of high male mortality rates, but the problem can be addressed

    Evgeny Yakovlev, July 2015
    Eastern European countries, particularly former Soviet Union economies, traditionally have the highest rates of alcohol consumption in the world. Consequently, they also have some of the highest male mortality rates in the world. Regulation can be effective in significantly decreasing excessive drinking and its related negative effects, such as low labor productivity and high rates of mortality. Understanding the consequences of specific regulatory measures and what tools should be used to combat excessive alcohol consumption is essential for designing effective policies.
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  • International trade regulation and job creation

    Trade policy is not an employment policy and should not be expected to have major effects on overall employment

    L. Alan Winters, September 2014
    Trade regulation can create jobs in the sectors it protects or promotes, but almost always at the expense of destroying a roughly equivalent number elsewhere in the economy. At a product-specific or micro level and in the short term, controlling trade could reduce the offending imports and save jobs, but for the economy as a whole and in the long term, this position has neither theoretical support nor empirical evidence in its favor. Given that protection may have other—usually adverse—effects, understanding the difficulties in using it to manage employment is important for economic policy.
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  • Measuring disincentives to formal work

    Does formal work pay? Synthetic measurements of taxes and benefits can help identify incentives and disincentives to formal work

    Michael Weber, December 2015
    Evidence from transition economies shows that formal work may not pay, particularly for low-wage earners. Synthetic measurements of work disincentives, such as the formalization tax rate or the marginal effective tax rate, confirm a significant positive correlation between these measurements and the probability of informal work. These measures are especially informative for impacts at lower wage levels, where informality is highest. Policymakers who want to increase formal work can use these measurements to determine optimal labor taxation rates for low-wage earners and reform benefit design.
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  • Female labor force participation and development Updated

    Improving outcomes for women takes more than raising labor force participation—good jobs are important too

    Sher Verick, December 2018
    The relationship between female labor force participation and economic development is far more complex than often portrayed in both the academic literature and policy debates. Due to various economic and social factors, such as the pattern of growth, education attainment, and social norms, trends in female labor force participation do not conform consistently with the notion of a U-shaped relationship with GDP. Beyond participation rates, policymakers need to focus on improving women’s access to quality employment.
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  • How does international trade affect household welfare?

    Households can benefit from international trade as it lowers the prices of consumer goods

    Beyza Ural Marchand, August 2017
    Imported products tend to have lower prices than locally produced ones for a variety of reasons, including lower labor costs and better technology in the exporting country. The reduced prices may lead to wage losses for individuals who work in the production of a local version of the imported item. On the other hand, lower prices may be beneficial to households if the cheaper product is in their consumption basket. These welfare gains through consumption, on average, are found to be larger in magnitude than the wage effect for some developing countries.
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  • The effects of privatization on exports and jobs

    Can the privatization of state-owned enterprises generate a virtuous cycle between exports and employment?

    Yasuyuki Todo, November 2016
    The privatization of state-owned enterprises (SOE) in transition economies has often been found to improve employment and productivity of privatized SOEs, despite policymakers’ fears regarding possible job cuts. This positive effect can be enhanced if privatization also promotes firms’ exports. A recent firm-level analysis of China reveals that privatization has indeed a positive effect on export propensity, employment, and productivity in both the short and long term. The effect mostly stems from changes in firms’ attitudes about profits and risks due to competitive pressure.
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