Europe, post-communist, Private sector development, innovation and knowledge-based economy, CASE Reports, stabilization programme, CASE Network Studies and Analyses

Labour Markets and Wages Policies During Economic Transition


Arguments in favour of wage controls in Post-communist economies have changed considerably since the issue was first addressed in the late 1980s [Rostowski 1989 and 1990]. Then it was suggested that Latin American experience showed that wage controls were necessary during stabilization [Fischer 1988]. Two kinds of argument were put forward: the first centering on the danger of increases in the real wage upon stabilization, the second oncontrols (both wage and price) as a mechanism for co-ordinating expectations. Indeed, it was believed that if such controls were combined with the fixing of the exhcange rate, balancing the budget and bringing monetary emission under control, then "virtually costless stabilization is possible."