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Complexity and the Economy

Complexity and the Economy

Implications for Economic Policy

Edited by John Finch and Magali Orillard

The authors examine the causes and consequences of complexity among the broadly economic phenomena of firms, industries and socio-economic policy. The book makes a valuable contribution to the increasingly prominent subject of complexity, especially for those whose interests include evolutionary, behavioural, political and social approaches to understanding economics and economic phenomena.

Chapter 13: Comparing Post-Socialist Employment ‘Informalization’ in the Czech Republic and Hungary

Cristina Matos

Subjects: economics and finance, evolutionary economics, institutional economics


Cristina Matos INTRODUCTION Post-socialist transformation has entailed important changes in employment relations. In this chapter, I aim to establish that employment ‘informalization’ can be understood as an emergent process. In so doing, I develop a complexity framework in order to explain how processes of employment informalization are emerging differently in Hungary and the Czech Republic through interactions of within-firm dynamics, network effects and government economic policy. Complexity is defined as self-organization. My framework relies particularly on co-evolution and co-determination of institutions and individuals. Employment informalization is a general process in which employment relations become isolated from the formal institutions of employment law and ‘formalized’ administrative arrangements. This general process can be broken down into three forms of informalization: (1) unrecorded employment, (2) violations of established employment laws, and (3) the ‘externalization’ of employment.1 By ‘externalization’, I mean developments of and within external labour markets, such as the establishing of low wages, low levels of job-specific skills, and high levels of job rotation or employee turnover. By including external employment informalization in my definition, I go beyond established definitions, for example as stated by some development economists (Esim 2001; Schneider 2002). By including externalization, analysis can consider any interdependencies across the internal employment informalization practices of established firms and externalization. Notwithstanding the significant economic and social consequences of externalization, I focus on informalization processes that are internal to established firms. The main reason for this is that there are at least some 283 Finch 02...

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