Long-term unemployment and short-term unemployment benefits: The changing nature of non-employment subsidies in Central and Eastern Europe

Non-employment rates in all central and eastern European countries have increased dranatically thoroughout the transition and are currently larger than those of the lowest income OECD countries. Non-employment benefits other than unemployment benefits are providing income support to this growing number of able-bodied individuals out of work. Under the present design of unemployment benefits and social assistance, there may be serious incentive problems related to the shift from unemployment benefits to other, means-tested, non-employment benefits and this shift occurs in transition countries at rather early stages of an unemployment spell; these incentive problems are bound to become particularly acute in a less inflationary environment.