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

Abstract

One of the most conspicuous consequences of the transition of former socialist economies has been the emergence of large-scale, open unemployment - a phenomenon unheard of before the transition. These economies have thus been confronted with the difficult task of protecting the unemployed while avoiding undue fiscal costs and minimizing work disincentives created by such protection. Faced with the prospect of high unemployment, many transition economies introduced traditional, OECD-style unemployment insurance programs. The purpose of this paper is to evaluate those programs by examining their distributive and efficiency effects. To address distributive issues (an aspect so far neglected by researchers), we analyze data from household expenditure surveys and try to answer the following to questions: Which groups of workers benefited most? How have these programs changed the pre-transfer distribution of income? To examine efficiency effects, we review the existing literature. The questions that have received the most attention are: Have unemployment benefits created work disincentives? In particular, have more generous replacement rates and longer benefit durations affected the length of unemployment spells? We also examine whether the introduction of unemployment benefit programs has helped to speed up enterprise restructuring.