Skill Acquisition and Firm Creation in Transition Economies

IMF Working Papers, September 1, 1999

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Skill Acquisition and Firm Creation in Transition Economies

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Bibliographic details

• Authors: Wenli Li, Zuzana Brixiova, Tarik Yousef
• Published: September 1, 1999
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451855173.001

Summary

• The transition from plan to market has hinged on the development of a dynamic private sector that would serve as the engine of growth and employment creation.
• This paper examines the link between the availability of skilled workers and the creation of new private firms.
• Using a dynamic search model, it shows how the lack of skilled workers inhibits entrepreneurship and depresses the rate of firm creation, slowing the recovery of aggregate output and labor productivity during the transition.
• The paper also shows how policies designed to encourage skill acquisition by workers have a positive impact on the economy.

Model and Key Findings

• Framework: Dynamic search model linking worker skill acquisition to firm creation.
• Main findings:
  • Lack of skilled workers inhibits entrepreneurship.
  • Lack of skilled workers depresses the rate of firm creation.
  • Reduced firm creation slows the recovery of aggregate output.
  • Reduced firm creation slows the recovery of labor productivity.
  • Policies that encourage skill acquisition by workers positively affect economic outcomes.

Policy Implications and Recommendations

• Encourage skill acquisition by workers to foster entrepreneurship and increase firm creation.
• Design government policies that lower barriers to acquiring skills, thereby accelerating recovery of aggregate output and labor productivity during transition.

Subject Areas and Keywords

• Subject: Economic sectors, Human capital, Labor, Labor force, Public sector, Self-employment
• Keywords: Baltics, business opportunity, Central and Eastern Europe, Eastern Europe, entrepreneur hire, firm creation, government budget constraint, government policy, Human capital, Labor force, private sector, Public sector, Self-employment, Skill acquisition, transition, transition economy, unskilled worker, WP

Content in this bundle

• Skill Acquisition and Firm Creation in Transition Economies - WP/99/130
  • Skill Acquisition and Firm Creation in Transition Economies - WP/99/130 (Markdown version)
  • Skill Acquisition and Firm Creation in Transition Economies - WP/99/130 (PDF)