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05/24/93

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Labor movements emerging in former communist countries studied

STANFORD - Under traditional communist systems, Czechoslovakian and Hungarian labor unions were primarily political arms of the Communist Party. Pay and pay structures for most workers were determined by government planning authorities.

So when Robert J. Flanagan, a Stanford University Graduate School of Business professor, recently began doing field research in labor economics in those two countries, he became curious about the new pay mechanisms and the new role of labor unions that are beginning to emerge in Eastern Europe.

Flanagan explored the relationship between union and non- union pay-setting in Eastern Europe in a paper delivered in Berlin, in May, to the International Workshop on the Economic Transformation in Central and Eastern Europe.

"My conclusion is that the current wage policies risk retarding the economic transition in Eastern European labor markets," he said.

Flanagan's work has long focused on labor economics, with increasing attention in recent years to international issues. This spring Flanagan was named to the Konosuke Matsushita Professorship of International Labor Economics and Policy Analysis at the Business School. He is the second holder of the chair, succeeding Gerald M. Meier.

Much of Flanagan's current work involves the changing issues facing Eastern European labor economics.

"I'm interested in what is happening now that the former planning system has been abandoned and the old union institutions discredited as collective bargaining organizations," he said. "There are new union organizations oriented toward collective bargaining, but they appear to be weak in comparison to their Western counterparts.

"On the other hand, the expanding private sector is essentially non-union. Excess wage payments are taxed at punitive rates in the state sector, apparently on the theory that management is even weaker than the unions."

He also is analyzing data from Czechoslovakia, gathered before and after the 1989 revolution, to see what returns the former central planning system realized from human capital investments, such as schooling, and to see whether they have changed with the rise of market economies.

In addition, Flanagan serves as a guest faculty member in labor economics at the new Central European University in Prague. The university trains students from Eastern Europe and the former Soviet Union to teach modern social science and history in their home countries. Master's-level students spend eight months in economics courses at the university, and then return to their home countries for three months to conduct research for their master's theses.

Flanagan also serves as the Business School's representative to the MBA Enterprise Corps, a consortium of 22 United States management schools that place graduating MBAs in management positions in Eastern European firms. The program is considering expanding into Africa, Vietnam and China in the future.

He is the author of two books analyzing the effects of incomes policies in Western European countries, and of recent papers on "Incomes Policies in Eastern Europe" and "NAFTA and Competitive Adjustments in U.S. Labor Markets."

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