In spite of ongoing dramatic changes in labor market structure, transitional
economies display rather low worker flows across sectors and occupations.
Such low mobility can be explained by low returns to job changes as well as
by market segmentation in the allocation of job offers. We develop an
econometric model which enables us to characterize intertemporal changes in
probabilities of dismissal, remuneration, and offer arrival rates on the
basis of information on observed transitions and wage payments. The model is
estimated using data from the Polish Labor Force Survey. Our results
indicate a significant degree of segmentation in the allocation of job
offers and more stability in public sector versus private sector jobs. Our
model can also be used for policy experiments. In particular, we infer that
reductions of 10 per cent in the generosity of unemployment benefits will
not significantly boost outflows from the unemployment state. These
findings support explanations for low mobility in transitional economies,
which are based on informational failures, and high costs of moving from
public to private enterprises for those with high levels of job tenure and
labor market experience in the public sector.