The transition experience in retrospect: the labour market transformation was vital

Abstract

Looking back on the experience of transition, based on the case study of Slovenia, this article argues that the transformation of the labour market was a major area of transition. It therefore focuses on the topic of the relationship between output, employment, unemployment and inactivity of labour in a transition country. The transition period is from 1980 to 2006. The averages for the whole period 1980–2006 conceal too much. The whole transition period is divided into two sub-periods: the period of the transition crisis and the period of transitional rehabilitation. The thesis is that there were important differences between the two sub-periods as far as the labour market is concerned. Okun's relationships about the responses of employment and unemployment to output changes are valid during both sub-periods. Empirical estimates of the Beveridge relationship and job-matching function do not differ significantly for the first period compared with the second. The conclusion would be that the labour market responded normally during the transition and that the official statistical data do not reflect major systemic changes that the labour market has supposedly experienced during transition.

Notes

 1. Fischer et al. (1996, p. 45) assert that the transition can be said to have begun in 1989, with Poland inaugurating a reform programme on 1 January 1990 with the explicit goal of making the transition to a market economy.

 2. A similar approach was taken by Popov (2007).

 3. Kornai (1994) called such a period a ‘transformational recession’. The term ‘recession’ seems to me to be too mild for the events that were taking place. The term ‘crisis’ better explains the situation that arose.

 4. The term ‘recovery’, which is frequently used, describes a phase in the business cycle. It is not a business cycle phenomenon that we are talking about here.

 5. Svejnar (2002) gives a short discussion of the issue of ‘the end of the transition’.

 6. Ward (1958, p. 58) concluded that the Illyrian firm was in equilibrium producing less output and using less labour than its capitalist counterpart.

 7. Coefficient γ in Table 1a for 1980–92 equals coefficient b ₁ from Table 1, and coefficient γ for 1993–2005 period equals b ₁ + b ₃ from Table 1 (see Pindyck and Rubinfeld 1998, p. 125).

 8. I will return to this point in the next section.

 9. I would like to draw the attention of the reader to this assumption since it is essentially different from conditions in the transition period. In the next section, we shall work with the distinction between the potential labour force and the actual labour force.

10. λ = b ₁ for 1980–92; λ = b ₁+b ₃ for 1993–2006.

11. The potential labour force is close to the full-employment labour force, although it is not identical. In the case of Slovenia the maximum employment was achieved in 1987 and maximum labour force in 1988 owing to the increase of the registered unemployed in 1988, which was higher than the decrease in employment from 1987 to 1988.

12. α = c ₁ for 1980–92, α = c ₁+c ₄ for 1993–2006. β = c ₂ for 1980–92, β = c ₂+c ₅ for 1993–2006.