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

Author

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  • Ana Lamo

    (DG Reseach - ECB)

  • Julian Messina

    (UdG - Universitat de Girona = University of 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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  • Ana Lamo & Julian Messina & Etienne Wasmer, 2006. "Are Specific Skills an Obstacle to Labor Market Adjustment? Theory and an Application to the EU Enlargement," Working Papers hal-03459097, HAL.
  • Handle: RePEc:hal:wpaper:hal-03459097
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03459097
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    Cited by:

    1. Henry Ohlsson & Donald Storrie, 2012. "Long‐term effects of public policy for displaced workers in Sweden," International Journal of Manpower, Emerald Group Publishing Limited, vol. 33(5), pages 514-538, August.
    2. Lamo, Ana & Messina, Julián & Wasmer, Etienne, 2011. "Are specific skills an obstacle to labor market adjustment?," Labour Economics, Elsevier, vol. 18(2), pages 240-256, April.
    3. Alain Delacroix & Etienne Wasmer, 2007. "Job and Workers Flows in Europe and the US: Specific Skills or Employment Protection?," Post-Print hal-01053160, HAL.
    4. Vitale, Paolo, 2006. "A Market Microstructure Analysis of Foreign Exchange Intervention," CEPR Discussion Papers 5468, C.E.P.R. Discussion Papers.
    5. Alexandre Janiak, 2008. "Mobility in Europe - Why it is low, the bottlenecks, and the policy solutions," European Economy - Economic Papers 2008 - 2015 340, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    6. Bert Minne & Marc van der Steeg & Dinand Webbink, 2008. "Skill gaps in the EU: role for education and training policies," CPB Document 162, CPB Netherlands Bureau for Economic Policy Analysis.
    7. repec:spo:wpecon:info:hdl:2441/9938 is not listed on IDEAS
    8. repec:hal:spmain:info:hdl:2441/9938 is not listed on IDEAS
    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.
    10. Wesselbaum, Dennis, 2011. "Sector-specific productivity shocks in a matching model," Economic Modelling, Elsevier, vol. 28(6), pages 2674-2682.
    11. Mondschean, Thomas & Oppenheimer, Margaret, 2011. "Regional Long-term and Short-term Unemployment and Education in Transition: The Case of Poland," The Journal of Economic Asymmetries, Elsevier, vol. 8(2), pages 23-48.
    12. 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.
    13. Robalo Marques, Carlos & Dias, Daniel & Santos Silva, João M. C., 2006. "Measuring the importance of the uniform nonsynchronization hypothesis," Working Paper Series 606, European Central Bank.
    14. Wesselbaum, Dennis, 2015. "Sectoral labor market effects of fiscal spending," Structural Change and Economic Dynamics, Elsevier, vol. 34(C), pages 19-35.
    15. Julia Bock-Schappelwein & Jürgen Janger & Andreas Reinstaller, 2012. "Bildung 2025 – Die Rolle von Bildung in der österreichischen Wirtschaft," WIFO Studies, WIFO, number 45200, April.
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    17. repec:spo:wpmain:info:hdl:2441/9938 is not listed on IDEAS
    18. Jakob von Weizsäcker & Etienne Wasmer, 2007. "A better Globalisation Fund," Policy Briefs 36, Bruegel.
    19. 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.
    20. 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 2007:19, Uppsala University, Department of Economics.

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    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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