Worker-Firm Matching and Unemployment in Transition to a Market Economy: (Why) are the Czechs More Successful than Others?

CERGE-EI Working Paper Series No. 141

Posted: 14 Jan 2010

See all articles by Daniel Munich

Daniel Munich

CERGE-EI, joint workplace of the Charles University and Academy of Sciences of the Czech Republic

Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA; CEPR; IZA; CERGE-EI; University of Ljubljana

Katherine Terrell

Stephen M. Ross School of Business at the University of Michigan; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Gerald R. Ford School of Public Policy

Multiple version iconThere are 2 versions of this paper

Date Written: December 1998

Abstract

In this paper we compare the nature and determinants of outflows from unemployment in the case of the Czech and Slovak Republics which in early 1990’s experienced a process close to a controlled experiment. Overall, our study suggests that the exceptionally low unemployment rate in the Czech Republic as compared to Slovakia and the other Central and East European economies has been brought about principally by (1) a rapid increase in vacancies along with unemployment, resulting in a balanced unemployment-vacancy situation at the aggregate as well as district level, (2) a major part played by vacancies and the newly unemployed in the outflow from unemployment, (3) a matching process with strongly increasing returns to scale throughout (rather than only in parts of) the transition period, and (4) ability to keep the long term unemployed at relatively low levels.

Using the framework of matching functions we find that in many years the usual Cobb-Douglas specification and the hypothesis of constant returns to scale are rejected. A translog matching function with weak separability between the existing and newly unemployed is found to be the functional form best supported by the data. Our theoretical analysis also indicates that by not adjusting data for the varying size of districts or regions, previous studies may have generated estimates of the returns to scale of the matching function that were biased toward unity.

JEL Classification: P2, J4, J6, C33

Suggested Citation

Munich, Daniel and Svejnar, Jan and Terrell, Katherine, Worker-Firm Matching and Unemployment in Transition to a Market Economy: (Why) are the Czechs More Successful than Others? (December 1998). CERGE-EI Working Paper Series No. 141, Available at SSRN: https://ssrn.com/abstract=1535966 or http://dx.doi.org/10.2139/ssrn.1535966

Daniel Munich (Contact Author)

CERGE-EI, joint workplace of the Charles University and Academy of Sciences of the Czech Republic ( email )

Politickych veznu 7
Prague 1, 11121
Czech Republic
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+420 224 227 143 (Fax)

HOME PAGE: http://www.cerge-ei.cz

Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA ( email )

420 West 118th Street
New York, NY 10027
United States

CEPR

London
United Kingdom

IZA

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Germany

CERGE-EI

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HOME PAGE: http://www.cerge-ei.cz

University of Ljubljana ( email )

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Ljubljana, 1000
Slovenia

Katherine Terrell

Stephen M. Ross School of Business at the University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Gerald R. Ford School of Public Policy ( email )

735 South State Street, Weill Hall
Ann Arbor, MI 48109
United States

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