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A FEW HYPOTHESES CONCERNING JOBLESS GROWTH IN SELECTED CENTRAL EUROPEAN COUNTRIES

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Balcerzak A.

Optimum. Studia Ekonomiczne

2007

issue 1(33)

160-173

The paper presents some hypotheses that can contribute to understanding of jobless growth, which is the situation when high GDP growth does not result in improving the situation on the labor market. The paper concentrates on the following hypotheses: (i) hypothesis of convergence, (ii) influence of an institutional system of the labor market (iii) influence of heritage received after central planning. The hypothesis of convergence suggests that the backward countries are able to obtain higher rate of annual GDP growth than the affluent countries. This faster growth is based on a considerable increase in labor productivity that can be obtained easier in underdeveloped countries. However, it also enables to increase production without increasing the number of people employed. It must have obvious consequences for the unemployment growth. In the case of analyzed Central European countries the data seem to corroborate the theory. The institutional system that creates high transaction costs on the labor market can seriously contribute to jobless growth. Low elasticity of the labor market restricts abilities of companies to react to supply shocks. The employment tends to be quite stable in that case. However, the price for the stability is a low number of people employed. Companies try to avoid high costs of making an employee redundant in case of recession. Consequently, even during expansion companies avoid increasing the number of people employed. They prefer to take advantage of capital intensive solutions in order to increase production, which can lead to jobless growth. When we compare the restrictive institutional system of the labor market that exists in the European Union with the liberal system that exists in the US, we can see that the rate of jobless growth in Europe is much higher. In the case of post-socialist countries the ineffective structure of employment that was inherited from the planned economy can make a serious contribution to jobless growth. Jobless growth can accompany the return to effective employment structure. This hypothesis seems to be seriously supported by the data from the Central European economies. The analysis imposes a conclusion that the creation of institutional system that makes the transaction costs of the labor market lower, which can be especially obtained by increasing the elasticity of the labor market, is the only way to solve the problem of jobless growth.

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1 Optimum. Studia Ekonomiczne

1 Balcerzak A.

1 2007

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A FEW HYPOTHESES CONCERNING JOBLESS GROWTH IN SELECTED CENTRAL EUROPEAN COUNTRIES