Book Description

Over the past five to ten years Central and East European (CEE) countries have undergone a radical transformation of their economies from state socialism to various forms of market capitalism. During this time employment ratios plummeted from dubious 'full employment' to levels equal or lower than in countries of comparable economic development. This transformation of labor markets has left in its wake a high and persistent rate of unemployment, implying that individuals still seek work despite a dramatic deterioration of their employment chances. At the same time, low participation is putting an unbearable social security burden on the active population as systemic dependency ratios have risen and are currently significantly above those of the OECD countries. Entry into Europe, with the associated adoption of standards for social security provisions, will further increase the fiscal burden on the active population unless the ratio of employment to population, and the tax base for social policies, is increased. This book looks at the nature of unemployment in the CEE countries. It then analyses the determinants of labor supply and demand to predict where market equilibrium should be in these economies. The authors conclude by looking at the role of policy, arriving at a set of proposals for enhancing labor supply in the region. These include: better integration between unemployment benefits and social assistance; the maintenance and development of active labor market programs, increased spending on general secondary education; and investment into the infrastructure of transportation. This comprehensive account of labor market issues facing the CEE countries will be of interest to everyone concerned with the economics of transition and economic policies in the region. The contributors are Tito Boeri, Universita Bocconi, Milan, and CEPR; Michael Burda, Humboldt-Universitat zu Berlin and CEPR; and Janos Kollo, Institute of Economics, Hungarian Academy of Sciences, Budapest. The editors are Lorand Ambrus-Lakatos, Central European University, Budapest, and CEPR and Mark E Schaffer, Heriot-Watt University.