The Optimality and Overuse of Labour in Estonian Manufacturing Enterprises

Jaan Masso () and Almas Heshmati ()

No 884, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: For transition economies labour market flexibility is necessary for successful restructuring and reallocation of labour force and for coping with the requirements of the European Monetary Union. In this paper we apply a novel approach to the issue of labour market flexibility in transition countries by studying the optimality and efficiency of labour usage among Estonian manufacturing enterprises. A dynamic model is employed where both the long run optimal level of employment and the speed at which actual employment is adjusted to the optimal are modelled as functions of several variables. Firm level panel data from 1995 to 1999 were used. The results showed that in the long run employment responds greatest to wages, followed by value-added and capital stock. Speed of adjustment and labour use optimality and efficiency show much greater variations over firms than over time. In the course of time there occurs both labour saving technical change and an increase in the efficiency of labour usage. On average there is shortage of labour compared to firms’ own optimal level, while over use of labour compared to best-practice technology. Capital seems to be a binding constraint on the development of employment in the Estonian labour market.

Keywords: flexibility; employment; efficiency; labour; Estonia (search for similar items in EconPapers)
JEL-codes: C23 J23 P23 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2003-10
New Economics Papers: this item is included in nep-ifn and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published - published in: Economics of Transition, 2004, 12 (4), 683-720

Downloads: (external link)
https://docs.iza.org/dp884.pdf (application/pdf)

Related works:
Journal Article: The optimality and overuse of labour in Estonian manufacturing enterprises (2004)
Working Paper: THE OPTIMALITY AND OVERUSE OF LABOUR IN ESTONIAN MANUFACTURING ENTERPRISES (2003)
Working Paper: Optimality and Overuse of Labour in Estonian Manufacturing Enterprises (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp884

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().