Economic Restructuring, Unemployment, and Growth in a Transition Economy

Bankim Chadha, Fabrizio Coricelli and Kornélia Krajnyák
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Bankim Chadha: International Monetary Fund
Kornélia Krajnyák: International Monetary Fund

IMF Staff Papers, 1993, vol. 40, issue 4, 744-780

Abstract: This paper develops a model of the process of reallocation of labor from the state sector to the private sector. When growth is exogenously determined, we show that in the initial stages of transition unemployment will rise. After a critical stage in the transition process, restructuring is accompanied by a decline in unemployment. When growth is endogenously determined, and human capital is acquired by learning-by-doing, we show that whether or not restructuring eventually occurs is determined by the level of human capital in the private sector and the rate of unemployment. The effects of various shocks and government policies on the costs, speed, and eventual outcome of restructuring are analyzed.

JEL-codes: J41 J6 O11 P2 (search for similar items in EconPapers)
Date: 1993
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