The Incidence and Cost of Job Loss in a Transition Economy: Displaced Workers in Estonia, 1989-1999

50 Pages Posted: 1 Oct 2002

See all articles by Hartmut Lehmann

Hartmut Lehmann

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

Kaia Phillips

University of Tartu

Jonathan Wadsworth

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); IZA Institute of Labor Economics; William Davidson Institute; Royal Holloway College University of London

Date Written: September 2002

Abstract

We examine the pattern and costs of worker displacement in one of the more reform-oriented transition countries, Estonia, as the transition process develops. Using Labour Force Survey data covering the period 1989-1999, we show that after the initial shock, displacement rates in Estonia have fallen back to levels observed in several western economies, as the economy picks up. The incidence of displacement is also similar to that in the West; concentrated on the less skilled and those with short job tenure. Roughly half of those displaced find re-employment within two months while the other half lingers on in the state of non-employment. There is less evidence however of a wage penalty to job loss, unlike in some Western countries, a fact one might attribute more to the nature of the transition process than to wage setting institutions in Estonia. The main cost of displacement is then the income loss due to non-employment, which is severe for a minority of workers who experience long-term non-employment.

Keywords: Displaced Workers, Labour Markets in Transition

JEL Classification: J64, J65, P50

Suggested Citation

Lehmann, Hartmut F. and Phillips, Kaia and Wadsworth, Jonathan, The Incidence and Cost of Job Loss in a Transition Economy: Displaced Workers in Estonia, 1989-1999 (September 2002). IZA Discussion Paper No. 567; William Davidson Institute Working Paper No. 489. Available at SSRN: https://ssrn.com/abstract=331084

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

Kaia Phillips

University of Tartu

Ăślikooli 18
Tartu 50090, 50090
Estonia

Jonathan Wadsworth

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
England

IZA Institute of Labor Economics

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

William Davidson Institute

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

Royal Holloway College University of London

Senate House
Malet Street
London, TW20 0EX
United Kingdom

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