Innovation, income repartition and growth in transition countries

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This paper highlights the role of self-employment in transition economies. It focuses on the process of labor allocation and on the determination of development paths. There are three sectors, two of which – industry and services – show specific innovation patterns. These innovations, presented in a Schumpeterian creative destruction framework, generate flows on the labor market. The third sector (subsistence agriculture, informal activities) is conceived as a form of unemployment, specific of transition. By comparing this theoretical framework with the experience of Poland and Romania, the authors put forward and calculate an original indicator of transition, which is the ratio of the self-employee’s income in services to the average wage in industry. It expresses both the maturity and the orientation of the transformation process. – Summary AFRI-2002