How Important are Labor Market Institutions for Labor Market Performance in Transition Countries?

50 Pages Posted: 4 Jan 2010

See all articles by Hartmut Lehmann

Hartmut Lehmann

University of Bologna - School of Economics, Management, and Statistics; IZA Institute of Labor Economics

Alexander Muravyev

Saint Petersburg Branch National Research University Higher School of Economics; Institute for the Study of Labor (IZA)

Date Written: December 2009

Abstract

This paper offers a first comprehensive study of the relationship between labor market institutions and policies and labor market performance in the countries of Eastern Europe and Central Asia, which in the last two decades experienced radical economic and institutional transformations. Based on a new and unique hand-collected dataset, the paper first documents the evolution of labor market institutions and policies in the transition region. The data show a clear trend towards liberalization of labor markets, especially in the countries of the former Soviet Union, but also substantial differences across the countries studied. Second, the paper takes advantage of the large variation in the key economic and institutional variables to test several predictions concerning the role of institutions and polices in explaining labor market outcomes. The results of our econometric analysis are generally consistent with the view that institutions matter for labor market outcomes, and that deregulation of the labor markets improves their performance. The analysis also suggests several significant interactions between different institutions, which are in line with the idea of reform complementarity and broad reform packages. We also show that there are important advantages of focusing on a broader set of labor market outcomes, and not only on the unemployment rate, which until now has been the main approach in the empirical literature.

Keywords: labor market institutions, unemployment, transition economies

JEL Classification: E24, J21, P20

Suggested Citation

Lehmann, Hartmut F. and Muravyev, Alexander, How Important are Labor Market Institutions for Labor Market Performance in Transition Countries? (December 2009). IZA Discussion Paper No. 4673. Available at SSRN: https://ssrn.com/abstract=1530677

Hartmut F. Lehmann (Contact Author)

University of Bologna - School of Economics, Management, and Statistics ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Alexander Muravyev

Saint Petersburg Branch National Research University Higher School of Economics ( email )

Kantemirovskaya str. 3a
St. Petersburg, 194000
Russia

HOME PAGE: http://https://www.hse.ru/en/org/persons/127811036

Institute for the Study of Labor (IZA) ( email )

Schaumburg-Lippe-Str. 5-9
Bonn, D-53113
Germany

HOME PAGE: http://www.iza.org/en/webcontent/index_html

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