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Mind the Gap: Unemployment in the New EU Regions

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Author Info
Anna Maria Ferragina (CNR and University of Rome "Tor Vergata")
Francesco Pastore () (University of Naples II and IZA Bonn)

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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 neoclassical tradition. In the typical neoclassical 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. Prefiguring 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, FDI and various agglomeration factors help explain the success of capital cities compared to peripheral towns and rural areas in achieving low unemployment.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1565.

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Length: 46 pages
Date of creation: Apr 2005
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Handle: RePEc:iza:izadps:dp1565

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Related research
Keywords: regional unemployment; structural change; labour turnover; optimal speed of transition; Central and Eastern Europe;

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Find related papers by JEL classification:
J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies
P2 - Economic Systems - - Socialist Systems and Transition Economies
R1 - Urban, Rural, and Regional Economics - - General Regional Economics
R23 - Urban, Rural, and Regional Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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References listed on IDEAS
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. David Katrencik & Joanna Tyrowicz & Piotr Wójcik, 2008. "Unemployment Convergence in Transition," Working Papers 2008-07, Faculty of Economic Sciences, University of Warsaw. [Downloadable!]
    Other versions:
  2. Jan Fidrmuc & Peter Huber, 2007. "Introduction," Empirica, Springer, vol. 34(4), pages 281-286, September. [Downloadable!] (restricted)
  3. Kenmei Tsubota, 2009. "Agglomeration and wage bargaining," KIER Working Papers 675, Kyoto University, Institute of Economic Research. [Downloadable!]
  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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