ECONOMIC-POLICY AND EMPLOYMENT IN THE TRANSITION ECONOMIES OF CENTRALAND EASTERN-EUROPE - WHAT HAVE WE LEARNED

Considering macroeconomic developments and economic and labour market restructuring after several years of transition, the author suggests t hat supply shocks, not deflationary policies or restructuring explain output collapse. Unemployment rose sharply in many countries, but priv ate firms draw workers directly from the state sector while long-term unemployment grows. The extent of restructuring should thus be measure d not by unemployment levels but by changes in the sectoral compositio n of output. After discussing wage-setting options he recommends gradu al rationalization of overstaffed state firms, encouragement of privat e-sector recruitment and business start-ups, and policies for mobility to sustain an eventual recovery in employment.