Worker Displacement During the Transition: Experience from Slovenia

37 Pages Posted: 13 Sep 2004

See all articles by Peter F. Orazem

Peter F. Orazem

Iowa State University and IZA; IZA Institute of Labor Economics

Milan Vodopivec

World Bank - Human Development Network; IZA Institute of Labor Economics

Ruth Wu

Federal Reserve Banks

Multiple version iconThere are 2 versions of this paper

Date Written: September 2004

Abstract

The transition to market in Slovenia created labor displacements that were on par or greater than that experienced in North America in the 1980s. A simple theoretical model suggests that factors which raise the probability of layoff should also increase the probability of a quit, predictions that are borne out in data. Probability of both layoffs and quits fell with worker tenure, firm profitability and expected severance costs. Individuals facing a higher probability of displacement accepted slower wage growth than otherwise comparable workers. The incentives to avoid displacement were strong - workers that actually were displaced faced a slow process of transiting out of unemployment with only one-third finding reemployment. Correcting for selection, real wage losses for displaced workers are comparable to those reported for displaced workers in North America.

Keywords: displacement, subsidies, wages, reemployment, Slovenia, selection, specific human capital

JEL Classification: J63, P2

Suggested Citation

Orazem, Peter Francis and Vodopivec, Milan and Wu, Ruth, Worker Displacement During the Transition: Experience from Slovenia (September 2004). IZA Discussion Paper No. 1297; World Bank Policy Research Working Paper No. 1449, Available at SSRN: https://ssrn.com/abstract=589203 or http://dx.doi.org/10.2139/ssrn.589203

Peter Francis Orazem (Contact Author)

Iowa State University and IZA ( email )

260 Heady Hall
Ames, IA 50011
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515-294-8656/515-294-7740 (Phone)
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IZA Institute of Labor Economics

P.O. Box 7240
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Germany

Milan Vodopivec

World Bank - Human Development Network ( email )

1818 H Street, NW
Washington, DC 20433
United States

IZA Institute of Labor Economics

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

Ruth Wu

Federal Reserve Banks

Washington, DC
United States

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