How to Overhaul the Labor Market: Political Economy of Recent Czech and Slovak Reforms

CERGE-EI Discussion Paper No. 126

Posted: 6 Dec 2004

See all articles by Stepan Jurajda

Stepan Jurajda

CERGE-EI; IZA Institute of Labor Economics; Academy of Sciences, Czech Republic

Katarina Mathernova

World Bank

Date Written: March 2004


The Czech and Slovak Republics - until 1993 two parts of former Czechoslovakia - offer a unique reform comparison. Even though Slovakia faced higher unemployment since early transition and it was subject to greater reform failures, the two countries experienced similar macroeconomic paths over the first decade of transition. However, since the currency crises of 1997(8), their depth of reforms has been very different, with Slovakia making major strides to improve the labor market. We suggest two explanations, one based on fiscal pressures, the other stemming from political developments. The Slovak reforms of 1998 to 2002 benefited from a window of opportunity created by pre-1998 policy failures. A small team of advisors working under an influential Cabinet member drafted and implemented many successful reforms in spite of resistance mounted by political opponents. After the 2002 electoral victory of pro-reform parties, the labor market administration has implemented a sweeping reform agenda, which benefits from the weakness of its opponents, notably the trade unions. In contrast, the post-1998 Czech governments are closely tied to trade unions and oppose radical reforms in the labor market despite rising fiscal pressures and unemployment.

Suggested Citation

Jurajda, Stepan and Mathernova, Katarina, How to Overhaul the Labor Market: Political Economy of Recent Czech and Slovak Reforms (March 2004). CERGE-EI Discussion Paper No. 126, Available at SSRN:

Stepan Jurajda (Contact Author)

CERGE-EI ( email )

Politickych veznu 7
Prague 1, 111 21
Czech Republic


IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072

Academy of Sciences, Czech Republic

Narodni 3, 111 42
Economics Institute
Praha 1
Czech Republic

Katarina Mathernova

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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