Transition Economics

Russian Energy Policy in the South Caucasus

by Lilia Arakelyan

The distribution of wages in Belarus

by Francesco Pastore

Co-authored with Alina Verashchagina.
Revised version published in: Comparative Economic Studies, 2006, 48 (3), 351-376.

This paper uncovers evidence on the distribution of wages in Belarus in the second half of the 1990s. The returns to... more This paper uncovers evidence on the distribution of wages in Belarus in the second half of the 1990s. The returns to education and work experience are high and stable. While the former is a typical finding of transition studies, the latter is not.
This might be due to the pervasive role of the state in fixing wages in the dominant budget sector, rather than to market forces coming into play. Women experience a small, though largely unexplained wage gap coupled with higher than average
returns to education. A wage curve effect is found, which is similar in size to that of other transition countries, but much higher than in market economies.

On the Transformation Process in the Socialist Economies

by Mia Mikic

Mind the gap: Unemployment in the new EU regions

by Francesco Pastore

Co-authored with Anna Maria Ferragina.
Journal of Economic Surveys, 22(1): 73-113 (also available as IZA DP, n. 1565, April).

The paper surveys the theoretical and empirical literature on regional unemployment during transition in Central and... more The paper surveys the theoretical and empirical literature on regional unemployment during transition in Central and Eastern Europe. The focus is on optimal speed of transition (OST) models and on comparison of them with the neo-classical tradition. In the typical neo-classical models, spatial differences essentially arise as a consequence of supply side constraints and institutional rigidities. Slow-growth, high-unemployment regions are those with backward economic structures and constraints on factors mobility contribute to making differences persistent. However, such explanations leave the question unanswered of how unemployment differences arise in the first place. Economic transition provides an excellent testing ground to answer this question. Pre-figuring an empirical law, the OST literature finds that the high degree of labour turnover of high unemployment regions is associated with a high rate of industrial restructuring and, consequently, that low unemployment may be achieved by implementing transition more gradually. Moreover, international trade, foreign direct investment and various agglomeration factors help explain the success of capital cities compared to peripheral towns and rural areas in achieving low unemployment. The evidence of the empirical literature on supply side factors suggests that wage flexibility in Central and Eastern Europe is not lower than in other EU countries, while labour mobility seems to reinforce rather than change the spatial pattern of unemployment.

Labour turnover and the spatial distribution of unemployment. A panel data analysis using employment registry data

by Francesco Pastore

Co-augthored with Joanna Tyrowicz-
Paper presented at the XXV AIEL Conference, University of Chieti and Pescara, 2010.

This paper aims to study whether the local variation in unemployment rates is related to labour turnover and what is... more This paper aims to study whether the local variation in unemployment rates is related to labour turnover and what is the sign of such relationship. In addition, the paper aims to assess the relative impact of inflow and outflow from unemployment on the dynamics of the local unemployment rate. The empirical analysis is based on a newly available unique dataset from the employment registry of a transition economy (Poland), encompassing nine years of monthly data (from 2000 to 2008) at a county (poviat) level. We find that turnover, as well as inflows and outflows separately, are ceteris paribus positively related to the unemployment level. This general conclusion is robust to sub-sampling that addresses potential heterogeneity of the analysed local labour markets. It is also robust to the use of different panel estimators, such as fixed effect and alternative GMM specifications, as well as for spatial clustering of poviats. Nonetheless, point estimators differ, reflecting the diverse adjustment patterns. We also find that elasticity is larger in the case of the inflow rate than for the outflow rate. Finally, we demonstrate that the effect is stronger in low unemployment regions.

Factor Endowment and Market Size in EU-CEE Trade: Would Human Capital Change Actual Quality Trade Patterns?

by Francesco Pastore

Co-authored with Anna Maria Ferragina.
Eastern European Economics, 43(1): 5-33 (also available as IZA DP, n. 1139, May 2004).

This paper aims to test several hypotheses on determinants of the quality of trade in cross-country regressions,... more This paper aims to test several hypotheses on determinants of the quality of trade in cross-country regressions, taking a sample of trade competitors in EU markets. The hypotheses are those underlying two models of vertical intra-industry trade: the so-called neo-Heckscher-Ohlin model, and an economic geography model based on market size and economic integration.

The explanatory variables significantly affect the dependent variable, and we conclude that these variables give rise to specialization in different segments of the quality spectrum. Information is drawn from the analysis with respect to Central and Eastern European (CEE) specialization in low-quality exports to EU markets. In particular, the estimates suggest the existence of a process of the "crowding out" of existing human capital due to the process of economic transition. Moreover, the smaller market size of the EU-accession countries could contribute to strengthening the CEE disadvantage in high-quality segments of production.

Influence of education and training systems on participation of young people in labour market of CEE economies: a comparison of Poland and Slovenia

by Francesco Pastore

Co-authored with Polona Domadenik.
International Journal of Entrepreneurship & Small Business, 3(5): 640-666.

Little attention has been given to youth unemployment in transition countries. However, it has significant detrimental... more Little attention has been given to youth unemployment in transition countries. However, it has significant detrimental effects in factors that affect welfare in the long term, such as human capital accumulation and fertility rates. The aim of this paper is to study the determinants of participation of young people in labour market in two countries (Poland and Slovenia) that implemented different reform paths to the market system. The analysis is carried out using individual level data drawn from the labour force survey in 1997 and 2002. The focus is on education and training systems. The results of a multinomial LOGIT model of the probability belong to six different labour market status suggests that tertiary educational attainment and participation in training programmes work as buffers against unemployment especially for adults.

Corrupted Transition: the painful reeducation of Leviathan

by Momtchil Karpouzanov

Published in "East-West Journal of Economics and Business", Vol. XV, n°1, pp. 45-64.
Presented at the Studium "Balkans and Europe: Economic Integration, Challenges and Solutions" conference, 3 & 4 February, 2011 Orléans, France

The EU integration of Romania and Bulgaria is merely a political decision and as such may in fact jeopardize the... more The EU integration of Romania and Bulgaria is merely a political decision and as such may in fact jeopardize the future development of those countries and the process of catching-up with EU standards. Because of their significantly different patter of transition in respect to other former communist states, those two countries, as well as most of the others Balkan countries struggle to embrace a genuine “rule of law” with strong and reliable institutions. Relying on the assumption that institutions matter, it is argued here that the lack of internal political capability to enhance institutions is likely to result in a growing and deepening lag in respect to the rest of the Union. While the perspective of EU membership has been a major factor and a driving force of institutional alignment with the Union, once acquired it has no longer the needed discipline effect. Moreover, the recent economic crisis has contributed to further untie the leashes of fiscal and regulatory discipline which are assumed to be crucial for the institutional catching-up process. Endemic and widespread corruption and the persistence of heavy and under efficient administration are obvious characteristics of this situation. Therefore, one may argue that some if not most of the Balkan countries may face in the mid-term as well as in the long-run slow growth and insufficient development, increasingly lagging behind the rest of the Union.

The Determinants of Female Labour Supply in Belarus

by Francesco Pastore

Co-authored with Alina Verashchagina, in Ravi Kanbur and Jan Svejnar (2009, eds.), Labour Markets and Economic Development, Routledge, London (also available as IZA dp, n. 3457).

Unlike in many other transition countries, where the gender pay gap has remained stable while female employment rates... more Unlike in many other transition countries, where the gender pay gap has remained stable while female employment rates have reduced, in the case of Belarus women’ activity rate has been practically unchanged despite an increase in the gender pay gap. This paper investigates why this is the case by looking at the determinants of female labour force participation in 1996 and 2001 (data from the Belarusian Household Survey). The selectivity corrected wage equation is estimated to compute an expected wage offer for women. The latter is included, in the second step, as a regressor in the structural female labour supply equation, estimated by probit. Several measures for the care of children and elderly people, proxies for the opportunity cost of working, affect female participation, but do not generate sample selection mechanisms. The estimated elasticity of female participation to wages is low, at about 0.45 in 1996 and 0.41 in 2001. Moreover the data allows detecting poverty trap mechanisms, whereas women in low-income households have much lower than average participation rates. At the same time the elasticity of female labour supply with respect to the own wage appears to be much higher for the low-paid groups of women.

Focus on Transition II / 1999

by Johannes Chudoba

authored only a minor part, but member of the editorial team of this and similar publications from 1997 to 2000, including for the ECB

Targeting youth employment policy in Bulgaria

by Francesco Pastore

Co-authored with Iskra Beleva, Andrej Ivanov and Niall O’Higgins,
Economic and Business Review, 2001, 3(2): 113-135.

Youth unemployment and in particular long-term youth unemployment in Bulgaria is much higher than the EU average. Low... more Youth unemployment and in particular long-term youth unemployment in Bulgaria is much higher than the EU average. Low flows out of unemployment into a job, especially for the least educated and qualified young people residing in peripheral regions, are the principal source of long-term unemployment amongst young people. Evidence based on various data sources suggests on one hand that the most disadvantaged segments of the young population are left with two equally unsatisfactory alternatives: working in the informal sector and thus, in practice, often permanently withdrawing from the labour force, or emigrating. On the other hand, employment policies face significant financial and institutional constraints. Increasingly, with rising overall unemployment, passive policy is absorbing an increasing proportion of expenditure on labour market policy to the detriment of active policies. Moreover, important segments of young people are being bypassed by those active measures that do exist. An appropriate response requires action at the level of the education system as well as a more extensive and more effective active labour market policy. This paper concludes with some suggestions as to the way in which such policies might be developed.

Life (Dis)satisfaction and Decision to Migrate: Evidence from Central and Eastern Europe

by Olga Popova

English: The Reform of Public Administration In Albania

by Denita Cepiku

Urbanization trajectories in the Moscow Urban Field: The case of ‘New Moscow’

by Piotr Drozd

key words: urban development, New Moscow, placemaking, centripetal urbanism, transition, Russia

This purpose of this study is to investigate the pending extension of Moscow’s outer limits and consider it within a... more This purpose of this study is to investigate the pending extension of Moscow’s outer limits and consider it within a broader context of post-socialist urbanization trajectories. The paper analyses to what extent the ‘New Moscow’ project is driven by predetermined
structural forces (geometries of social and power relations, internalized neoliberalism, place-making strategies) and purposeful urban development practices. It is argued that the
Soviet material and cultural legacy produced a different type of urban dynamics from those occurring in Western cities. The said structural continuities fuel spontaneous and highly speculative initiatives, which are disconnected from visionary place-focused
policies. The author claims that the unduly hasty decision to expand the Russian capital in line with the ideas floated by President Dmitry Medvedev is yet another example of development-led planning underpinned by narrow political interests. key words urban development New Moscow placemaking centripetal urbanism
transition Russia

Private returns to human capital over transition: A case study of Belarus

by Francesco Pastore

Co-authored with Alina Verashchagina.
The Economics of Education Review, 25(1): 91-107 (also available as XVI EALE Conference 2004: electronic proceedings [Compact disc edition], University of Lisbon; and as IZA DP, n. 1409, November).

The gradualist approach to economic transition in Belarus would contribute to form the a priori expectation that the... more The gradualist approach to economic transition in Belarus would contribute to form the a priori expectation that the rate of return to education is low and the earnings profile by work experience flat, like they supposedly were under central planning. However, the first available estimates of Mincerian earnings equations based on the Belarusian Household Survey on Incomes and Expenditure suggest that the skill payoff was high in 1996, at about 10.1% per year, and stable. The return to 1 year of work experience is also high at 5%. This result maintains also after controlling for sample selection bias, despite a general reduction in the annual rate of return to education by about 20–30%. Though, it is ambiguous whether the high-skill payoff is the consequence of market forces coming into play or of policy decisions, considering the pervasive role of the state in the process of wage determination.

The labour market impact of the eu enlargement (hardback): a new regional geography of europe? book (series: aiel series in labour economics)

by Francesco Pastore

Co-edited with Floro Ernesto Caroleo.
Physica Verlag, Heidelberg.

Until recently, regional labour market imbalances were considered transitory phenomena, a consequence of state failure... more Until recently, regional labour market imbalances were considered transitory phenomena, a consequence of state failure in generating distorted investment incentives in depressed regions as well as of excessive labour market rigidities. Labour mobility and wage flexibility were at the core of the debate over the causes of and cures for regional labour market imbalances. This book bears witness to the changed perspective of research on these issues. In the recent literature, internal labour migration is depicted as a cause of further divergence between advanced and backward regions, as higher returns on human and physical capital are expected to be paid in those regions where these factors are already concentrated.

The book contributes to the debate by presenting important new findings on: a) the reasons why structural change in some sectors causes a slump in some regions, but not in others; b) the extent to which poverty traps explain regional imbalances as compared to such other alternative factors as spatial dependence and nonlinearity in growth behaviour; c) the degree of convergence across EU countries and regions; d) the role of labour mobility in reducing/increasing regional labour market imbalances, in particular in Central and Eastern Europe; e) and the role of an active labour market policy and child care facilities in alleviating the hardship of the weakest segments of the population.

Structural unemployment and structural change in Poland

by Francesco Pastore

Co-autherd with Andrew T. Newell.
Studi Economici, 54(69/3): 81-99.

This paper looks at regional unemployment inequality using individual-level data. We find that higher unemployment... more This paper looks at regional unemployment inequality using individual-level data. We find that higher unemployment regions are those with higher inflow rates to unemployment rather than higher durations of unemployment. This indicates that high unemployment is related to high rates of destruction of job-worker matches in Poland. Econometric analysis of the probability of flowing into unemployment from a job reinforces this impression, showing how middle-aged workers in particular and also those in manufacturing are much more likely to enter unemployment if they live in high unemployment counties. These results are evidence against theories of regional unemployment, which work through variations in the rate of job-finding.

Returns to education of young people in Mongolia

by Francesco Pastore

Post-Communist Economies, 22(2): 247-265.

Relatively little is known about the youth labour market in Mongolia. This paper studies returns to education of... more Relatively little is known about the youth labour market in Mongolia. This paper studies returns to education of 15-29-year-olds by taking advantage of a recent ad hoc School to Work Transition Survey. Based on augmented Mincerian earnings equations, education and work experience appear to be important determinants of earnings. Vocational does not provide higher wages than compulsory education. Factors bearing wage gains include: living in the capital city and in urban areas in general. Factors bearing wage penalties include: gender, informal work, training, using informal job search networks, herding. Union membership, being a migrant, the civil status are wage neutral.

The gender gap in early career in Mongolia

by Francesco Pastore

International Journal of Manpower, 31(2): 188-207 (also available as IZA DP, n. 4480, November).

Purpose of this paper
The paper studies the determinants of gender differences in early career in Mongolia, one... more Purpose of this paper
The paper studies the determinants of gender differences in early career in Mongolia, one of the fifty poorest countries of the world.
Design/methodology/approach
The analysis takes advantage of an ad hoc School to Work Survey (SWTS) on young people aged 15-29 years carried out in 2006. Extended and augmented Mincerian earning equations are run and then the Juhn, Murphy and Pierce (1993) decomposition method is applied to disentangle the quantity effect, the price effect and the residual wage distribution effect.
Findings
On average, female wages are not lower than those of males. However, although not statistically significant among teenagers (15-19), the conditional gender gap becomes significant and sizeable for the 20-29 year olds. The JMP decomposition shows that most of the gap is due to differences in the way the market values the same characteristics of men and women: in fact, quantity effects tend to reduce, whereas price effects tend to increase the gap. If wages were paid equally, women should have 11.7% more for their higher education attainment and overall 22% more, a substantial gap for the low earnings of Mongolians.
Research limitations/implications
Future research should assess the impact of aspirations of young people on their labour market choices.
Practical implications
The analysis shows that gender differences emerge in concomitance with women establishing a household and giving birth, suggesting that the current interventions to help mothers cope with maternity are insufficient. Changing this outcome is important to reach the Millennium Development Goals.
What is original/value of paper
Labour market issues in Mongolia are understudied, not to mention gender differences in early career.

Comparative advantages, job destruction and the regional pattern of polish unemployment

by Francesco Pastore

Co-authored with Andrew Newell and Mietek Socha.
Acta Oeconomica, 52(2): 187-204.

This paper investigates the relationship between industrial restructuring and regional unemployment in Poland.... more This paper investigates the relationship between industrial restructuring and regional unemployment in Poland. Poland's regional unemployment broke out of nothing at the beginning of the 1990s decade. Since then, it has remained remarkably unchanged over the decade for a variety of factors, such as the gradual restructuring process, labour supply rigidities and technological differences. The role of each of these factors is assessed within the framework of hazard functions applied to the inflow to unemployment from a job, computed using Polish Labour Force Survey data. When voivodships are groupedaccording to their unemployment rate it can be seen that low unemployment voivodships form a heterogeneous group, including both rural and urban areas. Applying a new method of analysis of the labour market effects of trade integration, the paper reveals circumstantial evidence on how Poland's international comparative advantages in labour-intensive manufacturing combine with the economic advantages of urbanised regions to play a significant role in shaping the regional distribution of Poland's unemployment.