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Are Specific Skills an Obstacle to Labor Market Adjustment? Theory and an Application to the EU Enlargement

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  • Ana Lamo

    (DG Reseach)

  • Julian Messina

    (Universitat de Girona)

  • Etienne Wasmer

Abstract

We argue that the existence of large amounts of specific human capital makes costly and slows down the adjustment in the labor market after large reallocation shocks. To illustrate this point we build a theoretical framework in which young agents’ career is heavily determined by initial education, and analyze the transition to a new steady-state after a sectoral demand shift. An interesting case study is the EU enlargement, which led to modernization of many sectors in eastern countries and to a fast decline of traditional industries. Using labor force data from a large economy with rigid labor markets, Poland, and a small open economy with increased flexibility, Estonia, we document and find support for our claim. Quantitative exercises suggest that the overspecializaton of the labor force in Poland explain to a large extent the much higher and persistent unemployment compared to Estonia during the period of EU enlargement.

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Paper provided by Sciences Po in its series Sciences Po publications with number 585.

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Date of creation: 2006
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Handle: RePEc:spo:wpmain:info:hdl:2441/9041

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  29. repec:fth:prinin:400 is not listed on IDEAS
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Citations

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Cited by:
  1. Lamo, Ana & Messina, Julián, 2010. "Formal education, mismatch and wages after transition: Assessing the impact of unobserved heterogeneity using matching estimators," Economics of Education Review, Elsevier, vol. 29(6), pages 1086-1099, December.
  2. Alexandre Janiak, 2008. "Mobility in Europe - Why it is low, the bottlenecks, and the policy solutions," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 340, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  3. Ohlsson, Henry & Storrie, Donald, 2007. "Long term effects of public policy for displaced workers in Sweden – shipyard workers in the West and miners in the North," Working Paper Series, Uppsala University, Department of Economics 2007:19, Uppsala University, Department of Economics.
  4. Thirunaukarasu Subramaniam & Ahmad Zubaidi Baharumshah, 2011. "Unemployment And Speed Of Adjustment In Asean-3 Economies: A Cointegration Analysis," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 56(03), pages 327-347.
  5. Jakob von Weizsäcker & Etienne Wasmer, 2007. "A better Globalisation Fund," Policy Briefs 36, Bruegel.
  6. Alain Delacroix & Etienne Wasmer, 2007. "Job and Workers Flows in Europe and the US: Specific Skills or Employment Protection?," Sciences Po publications info:hdl:2441/9938, Sciences Po.
  7. Bert Minne & Marc van der Steeg & Dinand Webbink, 2008. "Skill gaps in the EU: role for education and training policies," CPB Document, CPB Netherlands Bureau for Economic Policy Analysis 162, CPB Netherlands Bureau for Economic Policy Analysis.
  8. Lamo, Ana & Messina, Julián & Wasmer, Etienne, 2010. "Are Specific Skills an Obstacle to Labor Market Adjustment?," IZA Discussion Papers 5250, Institute for the Study of Labor (IZA).
  9. Etienne Wasmer, 2006. "General versus Specific Skills in Labor Markets with Search Frictions and Firing Costs," American Economic Review, American Economic Association, vol. 96(3), pages 811-831, June.

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