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Regional Unemployment and Human Capital in Transition Economies

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Author Info
Stepán Jurajda () (CERGE-EI, CEPR and IZA)
Katherine Terrell () (University of Michigan, CEPR and IZA)

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Abstract

Differences in regional unemployment in post-communist economies are large and persistent. We show that inherited variation in human-capital endowment across the regions of four such economies explains the bulk of regional unemployment variation there and we explore potential explanations for this outcome through related capital and labor mobility patterns. The evidence suggests that regions with high inherited skill endowments attract skilled workers as well as FDI. This mobility pattern, which helps explain the lack of convergence in regional unemployment rates, is consistent with the presence of complementarities in skill and capital. Nevertheless, we find no supporting evidence of human capital wage spillovers implied by the complementarities story. Unemployment of the least-skilled workers appears lower in areas with a higher share of college-educated labor and future research is needed to see if this finding as well as the observed migration pattern arise from different adjustments to regional shocks by education level brought about in part by Central European labor-market institutions, such as guaranteed welfare income raising effective minimum wages.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3176.

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Length: 41 pages
Date of creation: Nov 2007
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Handle: RePEc:iza:izadps:dp3176

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Related research
Keywords: unemployment; human capital; regional labor markets; transition economies; labor mobility; complementarities; spillovers; Czech Republic; Hungary; Romania; Ukraine;

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Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J0 - Labor and Demographic Economics - - General
J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers

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