Comparative Economic Studies

, Volume 47, Issue 4, pp 615–651 | Cite as

Unemployment Benefit Systems in Central and Eastern Europe: A Review of the 1990s

  • Milan Vodopivec
  • Andreas Wörgötter
  • Dhushyanth Raju
Regular Article

Abstract

The paper provides an overview of unemployment benefit systems in Central and Eastern Europe during the 1990s. It describes their institutional features (eligibility, the level and duration of benefits, and special rules), discusses issues arising in their implementation, and examines their performance. Income protection effects, derived from the empirical analysis of household income and expenditures surveys, pertain to the coverage, the average size of benefits in household income, and the targeting of benefits. Efficiency effects, obtained from a literature review, are related to the effects of benefits on the duration of unemployment spell, restructuring, and overall unemployment and employment rates. The evidence shows that (i) unemployment benefits were progressive; (ii) that, in countries with broad coverage and sizeable share of benefits in household incomes, they strongly reduced poverty; and (iii) that, similar to findings for developed economies, they created work disincentives.

Keywords

unemployment benefits poverty reduction unemployment 

JEL Classifications

P2 J65 

References

  1. Adamchik, V . 1999: The effect of unemployment benefits on the probability of re-employment in Poland. Oxford Bulletin of Economics and Statistics 61: 95–108.CrossRefGoogle Scholar
  2. Atkinson, AB and Micklewright, J . 1991: Unemployment compensation and labor market transitions: A critical review. Journal of Economic Literature 29: 1679–1727.Google Scholar
  3. Bardasi, E, Lasaosa, A, Micklewright, J and Nagy, G . 2001: Measuring the generosity of unemployment benefit systems: Evidence from Hungary and elsewhere in Central Europe. Acta Oeconomica 51(1): 17–42.CrossRefGoogle Scholar
  4. Blanchard, O . 1997: The economics of post-communist transition Clarendon Lectures in Economics Oxford: Oxford University Press.Google Scholar
  5. Blanchard, O . 1998: Employment Protection and Unemployment. MIT, Paper available at http://web.mit.edu/blanchar/www/ 16pp.
  6. Braithwaite, J, Grootaert, C and Milanovic, B . 2000: Poverty and social assistance in transition countries. St Martin's Press: New York.Google Scholar
  7. Boeri, T . 1996: Unemployment outflows and the scope of labor market policies in Central and Eastern Europe. In: OECD, ‘Lessons from Labor Market Policies in the Transition Countries,’ OECD Proceedings Paris: OECD.Google Scholar
  8. Boeri, T . 1997: Labor market reforms in transition economies. Oxford Review of Economic Policy 13(2): 126–135.CrossRefGoogle Scholar
  9. Boeri, T . 1998: Labor market flows in the midst of structural change in Commander S. (ed). Enterprise Restructuring and Unemployment Models of Transition, EDI Development Studies. World Bank: Washington.Google Scholar
  10. Boeri, T and Steiner, V . 1996: Wait unemployment in economies in transition: The case of Poland Zentrum for Europaishe Wirtschaftsforschung, processed, 28pp.Google Scholar
  11. Boeri, T and Terrell, K . 2002: Institutional determinants of labor reallocation in transition. Journal of Economic Perspectives 16(1): 51–76.CrossRefGoogle Scholar
  12. Cazes, S . 2002: Do labor market institutions matter in transition economies? An analysis of labor market flexibility in the late nineties. ILO, International Institute for Labor Studies Discussion paper 140/2002.Google Scholar
  13. Cazes, S and Scarpetta, S . 1998: Labor market transitions and unemployment duration: Evidence from Bulgarian and Polish micro-data. Econom Transition 6: 113–144.CrossRefGoogle Scholar
  14. Devine, TJ and Kiefer, NM . 1991: Empirical labor economics: The search approach. Oxford: Oxford University Press.Google Scholar
  15. Earle, J and Pauna, C . 1998: Long-term unemployment, social assistance and labor market policies in Romania. Empirical Economics 23(1–2): 203–235.CrossRefGoogle Scholar
  16. Faggio, G and Konings, J . 1999: Gross job flows and firm growth in transition countries: Evidence using firm level data on five countries. CEPR Discussion paper no 2261. CEPR: London.Google Scholar
  17. Feldmann, H . 2004: How flexible are labor markets in the EU accession countries –Poland, Hungary and the Czech Republic? Comparative Economic Studies 46: 272–310.CrossRefGoogle Scholar
  18. Forster, M . 2000: Trends and driving factors in income distribution and poverty in the OECD Area OECD Labor Market and Social Policy Occasional papers no. 42, OECD: Paris.Google Scholar
  19. Haltiwanger, J, Scarpetta, S and Vodopivec, M . 2003: How institutions affect labor market outcomes: Evidence from transition countries. The World Bank: Washinton, DC. processed 71pp.Google Scholar
  20. Ham, JC, Svejnar, J and Terrell, K . 1998: Unemployment and the social safety net during transitions to a market economy: Evidence from the Czech and Slovak Republics. American Economic Review 88(5): 1117–1142.Google Scholar
  21. Heckman, JJ and Pages, C . 2000: The Cost of Job Security Regulation: Evidence from Latin American Labor Markets NBER Working paper no. 7773. NBER: Cambridge, MA.Google Scholar
  22. Jones, DC and Kotzeva, M . 1998: Work incentives and other effects of the transition to social assistance in the transition economies: Evidence from Bulgaria. In OECD (eds). Lessons from Labor Market Policies in the Transition Countries OECD Proceedings OECD: Paris.Google Scholar
  23. Katz, LF and Meyer, BD . 1990: The impact of the potential duration of unemployment benefits on the duration of unemployment. Journal of Public Economics 41: 45–72.CrossRefGoogle Scholar
  24. Klugman, J, Micklewright, J and Rewdmond, G . 2002: Poverty in the Transition: Social Expenditures and the Working-Age Poor EBRD, processed.Google Scholar
  25. Kotzeva, M, Mircheva, D and Wörgötter, A . 1996: Evaluation of active and passive labor market policy in Bulgaria In OECD (eds). Lessons from Labor Market Policies in the Transition Countries, OECD Proceedings Paris: OECD.Google Scholar
  26. Krumm, K, Milanovic, B and Walton, M . 1994: Transfers and the Transition from Socialism. The World Bank Policy Research Working paper no. 1380. The World Bank: Washington, DC.Google Scholar
  27. Kwiatkowski, E . 1998: Unemployment Benefits and Labor Market Developments in Poland in Transition University of Lodz, Mimeo.Google Scholar
  28. Layard, R, Nickell, S and Jackman, R . 1991: Unemployment: Macroeconomic Performance and the Labor Market. Oxford University Press: New York.Google Scholar
  29. Ljungqvist, L and Sargent, T . 1997: ‘Taxes and Subsidies in Swedish Unemployment’, In: Freeman, R, Topel, R, Swedenborg B. (eds). The Welfare State in Transition: Reforming Swedish Model. SNS Forlag: Stockholm.Google Scholar
  30. Lubyova, M and van Ours, JC . 1999: Unemployment duration of job losers in a labor market in transition. Economics of Transition 7(3): 665–686.CrossRefGoogle Scholar
  31. Micklewright, J and Nagy, G . 1996: Evaluating labor market policy in Hungary, In: OECD (eds). Lessons from Labor Market Policies in the Transition Countries, OECD Proceedings, Paris: OECD.Google Scholar
  32. Micklewright, J and Nagy, G . 1998: The implications of exhausting unemployment entitlement in Hungary. Budapest University of Economics Working paper on the Labor Market, No.1998/2 Budapest University: Budapest.Google Scholar
  33. Nickell, S and Layard, R . 1999: Labor market institutions and economic performance. In: D. Card and O. Ashenfelter (eds). Handbook of Labor Economics, Vol. 3. North-Holland: Amsterdam.Google Scholar
  34. OECD. 1999: Employment outlook. Paris: OECD.Google Scholar
  35. OECD. 2000: Employment outlook. Paris: OECD.Google Scholar
  36. Puhani, PA . 1996: Poland on the dole: unemployment benefits, training and long-term unemployment during the transition. Zentrum for Europaishe Wirtschaftsforschung Discussion Paper No. 96–30.Google Scholar
  37. Riboud, M, Silva-Jauregui, C and Sánchez-Páramo, C . 2001: Does eurosclerosis matter? Institutional reform and labor market performance in Central and Eastern European Countries in the 1990s. In: Funck B, and Pizzati L. (eds). Labor, Employment, and Social Policies in the EU Enlargement Process: Changing Perspectives and Policy Options. The World Bank: Washington.Google Scholar
  38. Scarpetta, S and Reutersward, A . 1994: Unemployment benefit system and active labor market policies in Central and Eastern Europe: An overview. In: OECD (eds). Unemployment in Transition Countries: Transient or Persistent. OECD: Paris.Google Scholar
  39. Terrell, K, Lubyova, M and Strapec, M . 1996: Evidence on the implementation and effectiveness of passive and active labor market policies in the Slovak Republic. In: OECD (eds). Lessons from Labor Market Policies in the Transition Countries, OECD Proceedings, OECD: Paris.Google Scholar
  40. Vodopivec, M . 1995: Unemployment insurance and duration of unemployment. World Bank Policy Research working paper no. 1552. The World Bank: Washington, DC.Google Scholar
  41. Vodopivec, M . 1998: Transition from Cash Benefits to Work: The Case of Slovenia. Empirical Economics 23(1–2): 177–202.CrossRefGoogle Scholar
  42. Vodopivec, M . 2002: Worker reallocation during estonian transition to market. International Journal of Manpower 23(1): 77–97.CrossRefGoogle Scholar
  43. Vodopivec, M . 2004: Income support for the unemployed: issues and options. The World Bank: Washington, DC.CrossRefGoogle Scholar
  44. Vodopivec, M, Wörgötter, A and Raju, D . 2003: Unemployment benefit systems in Central and Eastern Europe: A review of the 1990s. Social Protection Discussion paper no. 0310, March 2003. The World Bank: Washington, DC.Google Scholar
  45. Vroman, W . 2002: Unemployment insurance and unemployment assistance: a comparison World Bank Social Protection Discussion paper no. 0203.Google Scholar
  46. World Bank. 2002: Transition – the first ten years: Analysis and lessons for Eastern Europe and the former Soviet Union. The World Bank: Washington, DC.Google Scholar

Copyright information

© Palgrave Macmillan Ltd 2005

Authors and Affiliations

  • Milan Vodopivec
    • 1
  • Andreas Wörgötter
    • 2
  • Dhushyanth Raju
    • 3
  1. 1.The World BankWashingtonUSA
  2. 2.OECDParis
  3. 3.Cornell UniversityIthacaUSA

Personalised recommendations