Job Reallocation in Georgia (2000-2004)
Large number of papers in Labor Economics focus of worker flows and job flows. Worker flows are closely associated with search and matching concepts, while job flows focus on job creation and job destruction. Analyzing these flows gives opportunity to understand labor market dynamics and the reallocation of labor. Job flows are especially important for understanding unemployment in general and frictional unemployment in particular.
Our focus in this paper is job destruction and job creation rates in Georgia for the period 2000-04. Overall business environment during period 2000-04 was highly unfavorable. It was characterized by inefficient entrepreneurial legislation framework represented by time consuming start up/liquidation and merger measures, extremely ineffective tax administration and excessively high tax rates that hampered the economy. These factors in general are highly correlated with new firm appearance rates that in turn affects the overall unemployment rate in the country. Read more
Georgian Labor Market Overview
This report provides a study of the LABOR market in Georgia based on an analysis 1998-1999 data of the Georgia LABOR Force Survey, which has been carried out by the State Department for Statistics with the assistance of UNDP and the ILO.
It begins with a historical background, briefly describing the Soviet LABOR market and the early years of transition to a market economy. It reveals that by the end of the 1990s, almost 10 years after the disintegration of the Soviet Union, the massive collapse in output had not been matched by an increase in open unemployment, as had been widely predicted. This was initially due to LABOR hoarding within enterprises, and then to a reallocation of LABOR from paid-employment into self-employment in small-plot agriculture. Contrary to expectations, privatization and restructuring have not led to a growth in small and medium enterprises, which were to be the driving force of economic growth. Read more
The Soviet Labor Market
The Soviet Union had a centrally planned LABOR market and economy. However, contrary to the widespread image of a system where workers were obliged to stay in the jobs that they were allocated, the Soviet LABOR market was characterised by a considerable degree of LABOR mobility. In practice, workers were reasonably free to change jobs and employers were reasonably free to compete for their LABOR.
There is evidence that the vast majority of hires were arranged directly between the individual and the prospective employer (Oxenstierna, 1990, p.109-113). Otsu (1992), reviews data for medium and large enterprises from a wide range of sources and finds that the turnover rate from the 1960s onwards was approximately 20% per annum (Otsu, 1992, chpt. VI). This rate was comparable to that of Western European countries and higher than that of countries such as Italy and Japan. Thus, although there were some restrictions on LABOR mobility, through housing and administrative constraints, by and large workers could move and were guaranteed employment and job security. Read more
Effects of the early years of transition (1990-1997) on Georgian Labor Market
Following the disintegration of the Soviet Union, Georgia’s economy collapsed, as a result of a civil war, two territorial conflicts and the disruption of former inter-republican trade links. By 1996, GDP had shrunk to 29% of its 1991 value, or to the equivalent of its value in 1963 (Samorodov and Zsoldos, 1997, p.II)13. However, contrary to expectations, this was not accompanied by a proportional increase in unemployment, which by 1996 reached only 13% of the labor force14 (Yemtsov, 2001, p.13).
When the centrally planned system broke down, western economists thought that unemployment would be the key transfer mechanism in the transition to a market economy. They argued that a pool of unemployed would be needed in order to have enough labor to fill the new jobs. Read more
