Low unemployment in the Czech Republic miracle or mirage.pdfVIP

The Czechs have wrought numerous accomplishments in transforming their country to a market economy; declining employment and labor force participation rates, however, blur the overall picture ccording to the conventional wis- sented in the literature. Accordingly, this article dom, the transformation from a plan- explores the reasons behind the highly touted A ned to a market economy is usually ac- “miracle” of low unemployment during and af- companied by a high degree of unemployment. ter that nation’s economic transformation from a The State sector sheds excess workers, who are centrally planned to a more market-oriented gradually absorbed into a growing private sec- economy. tor. In the Eastern bloc nations, it was hoped that the growth of the private sector would be rapid, despite its starting from a rather small base whose ability to absorb workers was The Czech Republic was part of the Austro- thought to be limited. However, as a result of Hungarian Empire until 1918. At that time, the this constraint, in practically all of those coun- nation of Czechoslovakia was created from the tries, the economic transformation was accom- two regions of what would become the Czech panied by high levels of unemployment during Republic (Bohemia and Moravia), along with the transitional period. 1 Slovakia and part of Silesia. The new