# Box 1: Data and Groupings

Our dataset combines a number of sources. The ILO’s 7<sup>th</sup> edition of the Key Indicators of the Labor Market (KILM) dataset provides labor market variables; the IMF’s April 2012 World Economic Outlook dataset gives us information on GDP; and the World Bank’s 2012 version of the World Development Indicators is the source for natural resource rents. We take structural reform indicators from the following data sets: the World Bank’s Worldwide Governance Indicators for the global sample; and the EBRD transition indicators for the ECA sample; the Fraser Institute’s economic freedom indicators; the KOF Institute’s globalization indices; and MIT’s Economic Complexity Observatory for a measure of export diversification.

The ECA sample includes 29 countries, although data is missing for some variables and years. The global sample comprises 168 countries, which includes all countries for which labor market and GDP data is available. The unit of analysis is the country. In ECA, we give the same weight to Russia, a country with over 70 million employed workers, and Estonia, a country with less than 600,000 employed workers.

We often group countries to capture broad trends. We use a mainly geographic grouping for ECA. We contrast the ECA countries to 19 Western European countries (WE) and to 100 ECA peers (Peers of ECA), defined as low and middle income countries outside of Europe. We also look at 21 highincome countries (Peers of WE) outside of Europe as peers for Western Europe. Within ECA, we distinguish between the Balkan (countries of former Yugoslavia without Croatia), the EU11 countries (the ten EU member countries of Central Europe and Croatia, which will join the EU next year), the Countries of Independent States (CIS), and Turkey. Finally, to make sure that group averages are not driven by outliers or missing data, we generally report the median.

As Central and Eastern Europe entered its third decade of market-based economic reforms, this study takes a new look at link of economic growth and job growth. It provides a cross-country analysis of the employment intensity of growth over the last decade and a half in the region of Eastern Europe and Central Asia (ECA). It makes the following contributions: First, we look at trends in labor market outcomes in ECA. We establish that ECA looks worse in key dimensions to the rest of the world. We also find that within ECA, labor market outcomes tend to be worst for the Balkan and best for Commonwealth of Independent States (CIS) countries.

Second, we calculate elasticities of economic growth to employment. Using different econometric specifications, we find that ECA’s elasticity (around 0.085 to 0.232) is noticeably less than in Western Europe (0.407 to 0.494) but higher than for the ECA peers and the Western Europe peers. Within ECA, it is highest among the EU10 countries and lowest among CIS countries.

Third, we find that the employment intensity of growth increased over time in ECA. During 2002 to 2007, it was about twice as high as during 1995 to 2001. The elasticities rose further during the global financial crisis of 2008 to 2010, in line with the trends outside of Europe. Within ECA, the increase over time is least pronounced for the CIS.

Fourth, we control for a number of factors that could affect the employment intensity of growth. We look at labor market and product market regulation, governance, macroeconomic policy, 3