Firms, Jobs, and Employment in Moldova
Despite low open unemployment, labor market outcomes are unsatisfactory in Moldova. Employment is low and job opportunities are scarce. The author examines labor market performance in Moldova by focusing on firm dynamics. He finds that the low leve...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2004/03/3960010/firms-jobs-employment-moldova http://hdl.handle.net/10986/14728 |
| Summary: | Despite low open unemployment, labor
market outcomes are unsatisfactory in Moldova. Employment is
low and job opportunities are scarce. The author examines
labor market performance in Moldova by focusing on firm
dynamics. He finds that the low level of employment in
Moldova is due to the low rate of firm entry and the low
rate of job creation in existing firms. Although the rate of
job destruction is high, this is typical of transition
economies, and is a problem only because it is not coupled
with a commensurate rate of job creation. Firm exit is
limited and thus is not an important factor behind job
losses. The only sector of the economy that creates jobs on
a net basis is that consisting of de novo private and small
firms. However, in Moldova this sector is significantly
smaller than in the most successful transition economies.
The author argues that the primary factor behind the small
size of the employment generating sector is the high cost of
doing business in Moldova. These include numerous
administrative barriers, intrusive and costly inspections,
and associated corruption. These costs-extremely high even
by regional standards-lower the expected returns to business
activity and thus discourage firm formation and growth. The
author hence recommends improvements in the investment
climate as a primary policy aimed at increasing productive
employment and lowering unemployment. Priority should be
given to fostering job creation through facilitating the
formation of new firms and to reducing the constraints on
the expansion of existing firms. The government should avoid
measures aimed at forestalling the destruction of unviable
jobs and firm exit as these are not conducive to long-run
productivity and employment growth. Enhancing labor market
flexibility is a further priority, as currently the
apparently stringent provisions of the Labor Code are not
complied with and enforced. Given the unsatisfactory
business environment, active labor market programs are
unlikely to be effective unless carefully targeted at the
most disadvantaged worker groups. |
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