Structural Change, Welfare Systems, and

This books deals with labour reallocation in the midst of structural change, drawing on the experience of economic transition in formerly planned economies. It details those features of social welfare systems best suited to fostering structural change while at the same time reducing socialcosts. The interaction between labour and social policies is studies, showing the crucial role that non-employment benefits play in both the scope and the speed of transition. By including the influence of education systems, institution-building, and policy-enforcement mechanisms, this book goes beyondprevious studies to provide a detailed analysis of the many contributing factors to the success or failure of the transition process.

Tito Boeri is Professor of Economics at Bocconi University, Milan. Formerly Senior Economist at the Organisation for Economic Co-operation and Development (OECD), he is Director of the Fondazione Rodolfo Debenedetti, and a member of the editorial board of the Journal of Comparative Economics.

Acknowledgements

vii

List of Abbreviations

ix

Introduction

1

(16)

The Puzzles of Transition

17

(37)

Introduction

17

(2)

What Did We Expect to Occur?

19

(10)

What Happened?

29

(14)

Identifying the Actual Policy Instruments

43

(11)

Building Blocks of the OST Models

46

(1)

Building Blocks of the OST Models

46

(8)

The Timing of Reforms

54

(51)

Introduction

54

(2)

The True and False Legacies of Central Planning

56

(14)

Putting the Legacies of Central Planning into a Framework

70

(13)

Unemployment Persistence and the Policy Experiments

83

(9)

Final Remarks on Timing

92

(13)

A Simple Model of Transition

94

(1)

Building Blocks

94

(1)

Values

95

(2)

Matching Technologies

97

(2)

Wage Determination and Job Creation

99

(1)

Market Tightness

99

(3)

Steady-State Equilibrium

102

(1)

Transition Paths

103

(1)

Fiscal Externality

104

(1)

Safety Nets, Earnings Inequalities and Reallocation

105

(56)

Introduction

105

(4)

Wage Setting in the Midst of Transition

109

(9)

Wage Dispersion, Unemployment and Non-Employment Benefits

118

(13)

The Large-Scale Unemployment Differentials

131

(20)

Final Remarks on Earnings Distribution

151

(10)

The Structure of Benefits and Reallocation

154

(1)

Endogenizing Workers' Heterogeneity

154

(3)

Main Results

157

(4)

Returning to Europe

161

(59)

Introduction

161

(4)

International Differences in Social-Policy Models

165

(9)

The Reasons for Bad Policies

174

(14)

EU Conditionality and the Informal Sector

188

(11)

Still Time to Change

199

(16)

Final Remarks

215

(5)

Unemployment Benefits and the Informal Sector

217

(3)

References

220

(15)

Index

235

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Structural Change, Welfare Systems, and Labour Reallocation Lessons from the Transition of Formerly Planned Economies

Summary

Author Biography

Table of Contents

Supplemental Materials