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IZA NewsResearchNovember 5, 2018

Ten years after the financial crisis

Labor market adjustment in emerging and post-transition economies

© iStockphoto.com/Mordolff

The impact of the financial crisis and the Great Recession on post-transition and emerging economies has varied tremendously. Some economies experienced very large recessionary shocks with long-lasting effects for the labor market, human capital formation and growth, while others benefited from policy efforts and an economic structure that alleviated negative labor market effects.

An IZA workshop jointly organized with the Higher School of Economics in Moscow took stock of labor market performance and adjustment in post-transition and emerging economies nearly ten years after the Great Recession.

Earnings inequality

In their study  “Winners and Losers After 25 Years of Transition: The Case of Slovenia”, Peter F. Orazem and co-authors review the gains to education, work experience and gender over 25 years of transition from plan to market using data on the universe of all workers in Slovenia over the period 1991–2015. They find that rates of return to education and work experience rose and remained high on average. However, the rapid expansion of tertiary education resulted in declining returns to schooling among the youngest cohorts of college graduates. The resulting decrease in earnings inequality across schooling groups among the young has been sufficient to lower overall wage inequality in Slovenia, unlike the typical rising wage inequality commonly observed in market economies since the 1990s.

Trade liberalization

The paper co-authored by Feicheng Wang on “Labor Market Reform, Firm-level Employment Adjustment and Trade Liberalization” empirically investigates whether the nature of firm-level employment adjustment is affected by the flexibility of the labor market and by an exposure to trade liberalization. It takes advantage of differences in local labor market conditions created by the non-uniform implementation of hukou reform in China to identify the employment effects of the reform. The results show that firms exposed to the hukou reform have higher employment adjustment rates on average than similar firms without reform, indicating that the labor market reform allowed more employment adjustment. Moreover, firms respond to trade shocks by adjusting employment relatively more in the presence of hukou reform. These findings offer important policy implications to the current labor market reform in China and to other developing countries with inflexible labor markets.

Minimum wages

In her paper “Do Minimum Wages Matter for Earnings Inequality? Evidence from Large Increases of Minimum Wage in Russia (2005-2017)”, Anna Lukyanova notes that little empirical work has been done on the effects of minimum wages in transition economies, where labor market institutions experienced rapid changes over the last decades. This paper presents empirical evidence on minimum wage effects for Russia, the largest transition economy. It uses regional variation in the relative level of the federal minimum wage to identify the impact of a large increase in the real value of the minimum wage on the distribution of wages in Russia between 2005 and 2015. The analysis suggests that the minimum wage can account for the bulk of the decline in the lower tail inequality, particularly for females.

The other presentations covered issues from labor supply and wage inequality to political economy aspects of the labor market (papers listed below, presenters named first).

Conference papers:

Do We Know How Relatively Rich Are We? Actual and Perceived Place in the Income Distribution Vladimir Gimpelson, Eugenia Chernina Wage Inequality between and within Public and Private Sector in Serbia in the Times of Austerity Marko Vladisavljevic Do Minimum Wages Matter for Earnings Inequality? Evidence from Large Increases of Minimum Wage in Russia (2005-2017) Anna Lukyanova Minimum Wage Setting in China: What Factors Matter for Local Governments? Hui Cao, Qiong Zhang Education – Job Mismatch and Employment Outcomes of Youth in Kyrgyzstan Kamalbek Karymshakov, Burulcha Sulaimanova The Changing Pattern of Wage Returns to Education in Post-Reform China Saizi Xiao, Niaz Asadullah What Drives Return to Education: Evidence from Russian Regions Aleksey Oshchepkov Spatial Econometric Modeling of Regional Unemployment in Russia: Comparison of Resource-rich and Resource-deficient Regions Olga Demidova, Victoria Mokhova Macroeconomic and Structural Properties of the Russian Labor Market: A Cross-country Comparison Elena Vakulenko, Evsey Gurvich Labor Force Attachment Patterns of Older Unemployed Workers: Analysis of the Transition to Retirement Pathways Ewa Galecka-Burdziak Winners and Losers After 25 Years of Transition: The Case of Slovenia Peter F. Orazem, Suzana Laporšek, Matija Vodopivec, Milan Vodopivec The Impact of Non-Cognitive Skills and Risk Preferences on Rural-to-Urban Migration in Ukraine Hartmut Lehmann, Sinem Ayhan, Kseniia Gatskova When Do Gender Wage Differences Emerge? A Study of Azerbaijan’s Labor Market Francesco Pastore, Sarosh Sattar, Nistha Sinha, Erwin R. Tiongson Within-firm and Between-firm Drivers of Wage Inequality in Central and Eastern Europe Iga Magda, Simone Moriconi, Jan Gromadzki The Impact of Migration and Remittances on Labor Supply in Tajikistan Enerelt Murakami, Eiji Yamada, Erica Sioson Labor Market Reform, Firm-level Employment Adjustment and Trade Liberalization Feicheng Wang, Chris Milner, Juliane Scheffel Beautiful Minds: Physical Attractiveness and Research Productivity in Economics Jan Fidrmuc, Boontarika Paphawasit

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  • emerging markets
  • financial crisis
  • Great Recession
  • human capital
  • labor market
  • post-transition economies
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