Returns to Mobility in the Transition to a Market Economy

In spite of ongoing dramatic changes in labor market structure, transitional economies display low worker flows across sectors and occupations. Using data from the Polish Labor Force Survey, we develop and estimate an econometric model that enables us to isolate the effects of dismissal and job offer arrival rates and wage offer distributions on observed transition probabilities and wage payments. Our findings suggest that low mobility can be explained by the relatively insignificant monetary returns to job changes as well as by market segmentation in the allocation of job offers. Using the estimated model, we infer that reductions in the generosity of unemployment benefits will not significantly boost outflows from the unemployed state.J. Comp. Econom.,March 1999, 27(1), pp. 4-32. CEPR and Università Bocconi, IGIER via Salasco 5, 20136 Milan, Italy; and New York University, 269 Mercer Street, New York, New York 10003.