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Are Specific Skills an Obstacle to Labor Market Adjustment?

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Author Info

  • Lamo, Ana

    ()
    (European Central Bank)

  • Messina, Julián

    ()
    (World Bank)

  • Wasmer, Etienne

    ()
    (Sciences Po, Paris)

Abstract

This paper shows that specialized education reduces workers' mobility and hence their ability to cope with economic changes. We illustrate this point using labor force data from two countries having experienced important macroeconomic turbulence; a large economy with rigid labor markets, Poland, and a small open economy with increased flexibility, Estonia. We find that holding a vocational degree is associated with much longer unemployment duration spells and higher likelihood of leaving activity for older workers. We then build a theoretical framework in which young agents' careers are heavily determined by the type of initial education, and analyze the transition to a new steady-state after a sectoral demand shift. Quantitative exercises suggest that the over-specialization of the labor force in Poland led to much higher and persistent unemployment compared to Estonia during the period of EU enlargement. Traditional labor market institutions (wage rigidity and employment protection) lead to an increase of the unemployment gap, but to a lesser extent.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5250.

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Length: 37 pages
Date of creation: Oct 2010
Date of revision:
Publication status: published in: Labour Economics, 2011, 18 (2), 240-256
Handle: RePEc:iza:izadps:dp5250

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Keywords: transition countries; vocational education; EU enlargement; specific skills;

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References

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Citations

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Cited by:
  1. Ariga, Kenn & Brunello, Giorgio & Iwahashi, Roki & Rocco, Lorenzo, 2006. "On the Efficiency Costs of De-tracking Secondary Schools," IZA Discussion Papers 2534, Institute for the Study of Labor (IZA).
  2. Lorenzo Rocco & Giorgio Brunello & Elena Crivellaro, 2011. "Lost in Transition? The returns to education acquired under communism 15 years after the fall of the Berlin Wall," Working Papers 17, AlmaLaurea Inter-University Consortium.
  3. Beker, Victor A., 2012. "A case study on trade liberalization: Argentina in the 1990s," Economics Discussion Papers 2012-3, Kiel Institute for the World Economy.

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