Labor Market Dynamics of Eastern Bloc Countries During Economic Transition PDF Download

Author: Changmo Kim
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Languages : en
Pages : 0

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Book Description
Countries undergoing economic transition in the early 1990s faced enormous challenges in the process of shifting from a centrally-planned economic system toward a market-based economy. During the transition period, large state sectors of the former Socialist countries in the Eastern bloc suffered indispensable restructuring demands from not only policy makers, but also from society. The massive industrial restructuring not only involved changes in firms' ownership from public to private, but also ignited a huge, socalled “transformational recession” (Kornai, 1994).The labor market consequences of the recession, large-scale job destruction and high unemployment were very severe; Yet, the labor market shocks that the Eastern bloc countries received were more intense than they had expected. In spite of the well-designed reform packages, the growth of the private sector was sluggish, and so weak as to catch up with the speedy pace of unemployment expansion. While most transition countries have overcome the recession moderately since 2000, some labor market performances such as the employment rate and employment-to-population ratio still have ample room for continuous improvement.Meanwhile, a set of reformers in Eastern bloc countries have prepared transition policies together with pursuing accession into the European Union. They consist of the seven countries of central and eastern Europe (CEE), Czech Republic, Slovakia, Slovenia, Poland, Hungary including three Baltic States that joined the EU in 2004, the two countries of southeastern Europe (SEE), Bulgaria and Romania, that joined in 2007, and Croatia, which became a member of the EU in 2013.The enlargement of the EU provided the transition countries with a well-ordered curriculum that induced them to learn essential rules of a market economy in the very early stage of transition. The EU operates a comprehensive approval process that complies with all the EU's standards, which consist of a well-functioning market economy, the capacity to deal with competition and market forces, the rule of law, and stable institutions guaranteeing democracy, etc. Thus, the prospective members of the EU were able to not only have a natural incentive to self-enforce the market institutions, but also receive strong political support for continuing reforms. This is why the remarkable institutional reforms cannot be fully understood without taking into account the EU enlargement movement in the early 1990s.This paper studies labor market dynamics of Eastern Bloc countries by comparing the long-term labor market performances of the newly affiliated EU countries with the countries that had not yet joined the EU. The analysis not only sheds light on why the labor market performances have been heterogeneous among the transition economies, but it also provides implications for both the future transition of North Korea and for the unification of the Korean Peninsula. The future labor market policies of South Korea with respect to North Korea's economy cannot help but have relevance to the economic transition of North Korea as well as to economic integration with North Korea. Thus the unique aspect of the Eastern Bloc's gradual integration into the EU can apply to the South Korea's labor market policies in preparation for the future unification.