Institutional uncertainty and European Social Union: Impacts on job creation and destruction in the CEECs

We discuss the effect of an adoption of the EU acquis communautaire on future labor market performance in the CEECs. For this purpose, we model and investigate the impact of institutional uncertainty (and its elimination) on job creation and job destruction in these countries. We conclude that the structural change on CEEC labor markets is fostered via reducing institutional uncertainty. However, the adoption of inefficient EU social and labor policy regulations might also entail significant risks for employment. Based on a real option value analysis, we investigate and evaluate the trade-off between lower institutional uncertainty and higher employment costs.