Publikacje | Publications

Joanna Tyrowicz, Lucas van der Velde, Jan Svejnar
Effects of Labor Reallocation on Productivity and Inequality – Insights from Studies on Transition, forthcoming Journal of Economic Surveys, doi: 10.1111/joes.12167
Published version (May 2016, heavily revised vs WP) | WP version (February 2015) | slides
List of papers included in meta-analysis | Replication files

From a theoretical perspective, the link between the speed and scope of rapid labor reallocation and productivity growth or income inequality is ambiguous. Do reallocations with more flows tend to produce higher productivity growth? Does such a link appear at the expense of higher income inequality? We explore the rich evidence from earlier studies on worker flows in the period of massive and rapid labor reallocation, that is, the economic transition from a centrally planned to a market-oriented economy in CEE. We have collected over 450 estimates of job flows from the literature and used these inputs to estimate the short-run and long-run relationship between labor market flows, labor productivity, and income inequality. We apply the tools typical for a meta-analysis to verify the empirical regularities between labor flows and productivity growth as well as income inequality. Our findings suggest only weak and short-term links with productivity, driven predominantly by business cycles. However, data reveal a strong pattern for income inequality in the short run—more churning during reallocation is associated with a level effect toward increased Gini indices.

Joanna Tyrowicz, Lucas van der Velde
Can We Really Explain Worker Flows in Transition Economies?
revised version (March 2016) | WP version (August 2014) | slides

This paper employs a new rich source of data on worker reallocation in transition economies and provides a decomposition of the aggregate changes into those attributable to sectoral reallocation, those attributable to transition per se and those attributable to demographics. Aghion and Blanchard (1994) provide a theoretical framework that allows to conceptualize a reallocation from an (implicitly inefficient) public sector to a (more efficient) private sector, which is extremely useful in the analyses of economic transition. However, transition processes are not isolated from global trends such as a shift from industry to services, which is more explicitly tackled in the sectoral reallocation models of Caballero and Hammour (1996, 2001). Finally, there are also demographic processes, which exhibit in labor market exits by people with outdated or no longer necessary skills and in labor market entries by people with possibly better matched competences. The aggregate changes in transition economies are a combination of these three mechanisms. We thus test the validity of Aghion and Blanchard (1994) as well as Caballero and Hammour (1996, 2001) in the context of 26 transition economies over the period 1989-2006. We find that demographics and education can accommodate a fair share of shift from public to private and from manufacturing to services – as opposed to the actual worker flows between jobs. Whether or not this results in reduced employment at the end of the transition process stems not from the wage setting mechanism (such as collective bargaining, indexation, etc.) but rather seems to be related to the policies able to keep older cohorts in employment.