Journal of Economic Perspectives: Vol. 16 No. 1 (Winter 2002)


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Institutional Determinants of Labor Reallocation in Transition

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Boeri, Tito, and Katherine Terrell. 2002. "Institutional Determinants of Labor Reallocation in Transition." Journal of Economic Perspectives, 16(1): 51-76.

DOI: 10.1257/0895330027111


The transition process differed in the countries of the Former Soviet Union (FSU) and those of Central and Eastern Europe (CEE) in terms of reallocation of labor real wage, employment and output adjustment. We sift through the theoretical and empirical literature to find an explanation for these diverging adjustment trajectories and conclude that they can be explained by the fact that the CEE countries adopted social policies that upheld wages at the bottom of the distribution forcing the old sector to restructure or collapse while the FSU countries allowed wages to free-fall not forcing the hand of the old sector.

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Boeri, Tito (IGIER-Bocconi, Milan, Italy, Center for Economic Policy Research, London, United Kingdom, William Davidson Institute, Ann Arbor, Michigan and Fondazione Rodolfo, Debenedetti,)
Terrell, Katherine (Business School and the Ford School of Public Policy at the University of Michigan, and William Davidson Institute, Ann Arbor, Michigan, and Centre for Economic)


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