Employment Uncertainty and the Incidence of Job Loss in Transition Economies: The Case for Central Europe

Abstract

A shared concern among Central European countries is the significant social cost imposed by market‐oriented reforms. Although a growing body of literature has addressed the incidence of such reforms on unemployment distribution and duration, little is known of the actual transitions of workers from employment to unemployment and specifically the dynamics of transition‐induced job loss. This study examines such transitions in the Czech and Slovak Republics, Poland, and Slovenia within econometric models whereby voluntary and involuntary employment separations are jointly determined. In this regard, employment reductions triggered by demand‐driven reforms are accommodated at the industry and the occupation level by redundancies as well as voluntary quits in anticipation of redundancy. In addition, employed workers within the models consider the “costs” of job loss (likelihood of long‐term unemployment) while both shirking, and thus risking dismissal, and contemplating quitting. Estimates on personal characteristic variables in the involuntary and voluntary separation equations provide important new information on the incidence of job loss in Central European transition economies and specifically how such loss likely varies by gender, age, marital status, and completed education. Particular attention is devoted to gender differentials.