Have the Determinants of Labour Market Transitions Changed Since the Beginning of the Reforms (Evidence from Bulgaria)

Abstract

The study analyzes determinants of labour transitions from unemployment to employment using micro-data from Household Budget Surveys in Bulgaria. The transition probabilities, modeled by logistic regressions, are explained by various demographic and socioeconomic characteristics of the individuals, local market indicators as well as by their household structure and financial incentives. The paper provides a deeper insight to the determinants of unemployment outflows focusing on the effects of unemployment benefits, social assistance schemes, expected wage, earnings of the spouse and on exits from employment concentrating on structural variables. Contrary to the earlier studies for Bulgaria and to similar studies for other transition economies the empirical analysis does not provide evidence that personal characteristics matter for escaping of unemployment in the periods of economic crisis and stagnancy. The unemployed seem to be led by expected wage and benefits as in the simplest search model. Household structure and in particular the presence of another unemployed is an important determinant of the reemployment probability. The econometric analysis also shows that determinants of labor transitions differ between years. In the years of macroeconomic instability (as 1996 and the first half of 1997 in Bulgaria) the segmentation of the labor market is less pronounced. Under conditions of extremely low labor demand the financial incentives and economic situation of the household appear to be more influential factors than personal characteristics of the unemployed for job search process.

JEL Classification: J63, J64