Institutional inertia and labor market adjustment in a late-reforming emerging economy
Abstract
Structural transformation in emerging economies often proceeds without a clear movement of labor into high-productivity sectors. This paper examines that pattern through Uzbekistan, a late-reforming economy in Central Asia, and reads its labor market trajectory against the wider post-socialist experience, drawing on Kazakhstan and Poland as contextual benchmarks. Using shift-share decomposition together with matched domain-specific and pooled panel regressions, we identify the sectors that drove employment change and assess how the supply of graduates relates to sectoral labor absorption. Employment change has followed a mainly service-led path, with manufacturing playing only a limited role in net job creation. The link between education and employment is uneven across sectors. Absorption is stronger in a few knowledge-intensive and highly skilled activities and weaker across several broader training areas. This pattern raises the question of whether labor reallocation is productivity-enhancing and underscores the need to align the expansion of higher education with the changing structure of labor demand.