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Mind The Gap: Unemployment In The New Eu Regions

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Author Info
Anna Maria Ferragina
Francesco Pastore

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Abstract

The paper surveys the theoretical and empirical literature on regional unemployment during transition in Central and Eastern Europe. The focus is on optimal speed of transition (OST) models and on comparison of them with the neo-classical tradition. In the typical neo-classical models, spatial differences essentially arise as a consequence of supply side constraints and institutional rigidities. Slow-growth, high-unemployment regions are those with backward economic structures and constraints on factors mobility contribute to making differences persistent. However, such explanations leave the question unanswered of how unemployment differences arise in the first place. Economic transition provides an excellent testing ground to answer this question. Pre-figuring an empirical law, the OST literature finds that the high degree of labour turnover of high unemployment regions is associated with a high rate of industrial restructuring and, consequently, that low unemployment may be achieved by implementing transition more gradually. Moreover, international trade, foreign direct investment and various agglomeration factors help explain the success of capital cities compared to peripheral towns and rural areas in achieving low unemployment. The evidence of the empirical literature on supply side factors suggests that wage flexibility in Central and Eastern Europe is not lower than in other EU countries, while labour mobility seems to reinforce rather than change the spatial pattern of unemployment. Copyright 2008 The Author Journal compilation © 2008 Blackwell Publishing Ltd.

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Article provided by Blackwell Publishing in its journal Journal of Economic Surveys.

Volume (Year): 22 (2008)
Issue (Month): 1 (02)
Pages: 73-113
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Handle: RePEc:bla:jecsur:v:22:y:2008:i:1:p:73-113

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References listed on IDEAS
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Cited by:
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  1. Jan Fidrmuc & Peter Huber, 2007. "Introduction," Empirica, Springer, vol. 34(4), pages 281-286, September. [Downloadable!] (restricted)
  2. Kenmei Tsubota, 2009. "Agglomeration and wage bargaining," KIER Working Papers 675, Kyoto University, Institute of Economic Research. [Downloadable!]
  3. David Katrencik & Joanna Tyrowicz & Piotr Wójcik, 2008. "Unemployment Convergence in Transition," Working Papers 2008-07, Faculty of Economic Sciences, University of Warsaw. [Downloadable!]
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  4. Francesco Pastore, 2005. "To Study or to Work? Education and Labour Market Participation of Young People in Poland," IZA Discussion Papers 1793, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Darja Boršiè & Alenka Kavkler, 2009. "Duration of Regional Unemployment Spells in Slovenia," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 7(2), pages 123-146. [Downloadable!]
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