11/2002 Andreas Freytag. Estonian labour market and EMU membership - Challenges and policy options
Working Papers of Eesti Pank. No 11, 2002
With the planned membership in EMU, Estonia will give up every option to pursue a discretionary monetary policy. This demands a very flexible labour market, returning to equilibrium by itself after a negative external shock. In general, the Estonian labour market regime allows for flexibility and labour force mobility. Nevertheless, there is a serious problem on the Estonian labour market, namely, a mismatch with respect to qualification. The paper discusses three potential remedies for this problem: 1) further development of the relatively underdeveloped social dialogue in Estonia, 2) an increase of the low extent of public labour market spending, and 3) a significant improvement of the education and training system. It turns out that concentration on education policy promises the highest yields. We conclude by referring to earmarked education vouchers. Such a system allows to fully employ the capacities of competition to generate the structure of qualifications necessary to increase the level of employment in Estonia.
Author's e-mail address: [email protected]
The views expressed are those of the author and do not necessarily represent the official views of Eesti Pank.
CONTENTS
- 1. Introduction
- 2. Estonian Labour Market Regime and Performance
- 2.1. Labour Market Flexibility
- 2.2. The Regime
- 2.3. The Performance of the Estonian Labour Market
- 2.4. Three Types of Remedy
- 3. Further Development of the Social Dialogue
- 4. Focus on Active Labour Market Policy
- 4.1. Theoretical Aspects of Active Labour Market Policy
- 4.2. Mixed Empirical Evidence for Successful ALMP
- 4.3. How to Improve the Effectiveness of ALMP in Estonia
- 5. Reform of Education and Continuous Training
- 5.1. Current Problems of Education and Training in Estonia
- 5.2. The Alternative: A Voucher Scheme
- 5.3. The Rationale for Vouchers
- 5.4. Potential Problems of a Voucher System in Estonia
- 5.5. Details of the Voucher Scheme for Estonia
- 5.6. Dealing with the Costs
- 5.7. Some Thoughts about the Feasibility
- 6. Conclusions
- References
Estonian Labour Market and EMU Membership - Challenges and Policy Options, Working Papers of Eesti Pank, No 11, 2002 (PDF*)
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