Discussion paper

DP2098 Returns to Mobility in the Transition to a Market Economy

In spite of ongoing dramatic changes in labour market structure, transitional economies display rather low worker flows across sectors and occupations. Such low mobility can be explained by low returns to job changes as well as by market segmentation in the allocation of job offers. We develop an econometric model that enables us to characterize intertemporal changes in probabilities of dismissal and remuneration, and offer arrival rates on the basis of information on observed transitions and wage payments. The model is estimated using data from the Polish Labour Force Survey. Our results indicate a significant degree of segmentation in the allocation of job offers and more stability in public sector versus private sector jobs. Our model can also be used for policy experiments. In particular, we infer that reductions of 10% in the generosity of unemployment benefits will not significantly boost outflows from the unemployment state. These findings support explanations for low mobility in transitional economies, which are based on informational failures, and high costs of moving from public to private enterprises for those with high levels of job tenure and labour market experience in the public sector.


Boeri, T and C Flinn (eds) (1999), “DP2098 Returns to Mobility in the Transition to a Market Economy”, CEPR Press Discussion Paper No. 2098. https://cepr.org/publications/dp2098