IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Mind the Gap: Unemployment in the New EU Regions

  • Ferragina, Anna Maria


    (University of Rome Tor Vergata)

  • Pastore, Francesco


    (University of Naples II)

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

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

in new window

Length: 46 pages
Date of creation: Apr 2005
Date of revision:
Publication status: published in: Journal of Economic Surveys, 2008, 22 (1), 73-113
Handle: RePEc:iza:izadps:dp1565
Contact details of provider: Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page:

Order Information: Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

References listed on IDEAS
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.:

as in new window
  1. Duffy, Fiona & Walsh, Patrick Paul, 2001. "Individual Pay and Outside Options: Evidence from the Polish Labour Force Survey," IZA Discussion Papers 295, Institute for the Study of Labor (IZA).
  2. Puga, Diego, 1997. "The Rise and Fall of Regional Inequalities," CEPR Discussion Papers 1575, C.E.P.R. Discussion Papers.
  3. Sibley, Christopher W. & Walsh, Patrick Paul, 2002. "Earnings Inequality and Transition: A Regional Analysis of Poland," IZA Discussion Papers 441, Institute for the Study of Labor (IZA).
  4. Diego Puga, 2002. "European regional policies in light of recent location theories," Journal of Economic Geography, Oxford University Press, vol. 2(4), pages 373-406, October.
  5. Damien NEVEN, 1994. "Trade Liberalisation with Eastern Nations. How Sensitive ?," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9407, Université de Lausanne, Faculté des HEC, DEEP.
  6. Faggio, Giulia & Konings, Jozef, 2003. "Job creation, job destruction and employment growth in transition countries in the 90s," Economic Systems, Elsevier, vol. 27(2), pages 129-154, June.
  7. Luca Barbone & Domenico J. Marchetti & Stefano Paternostro, 1999. "The early stages of reform in Polish manufacturing," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(1), pages 157-177, March.
  8. Jan Fidrmuc, 2002. "Migration and regional adjustment to asymmetric shocks in transition economies," CPB Discussion Paper 7, CPB Netherlands Bureau for Economic Policy Analysis.
  9. Pastore Francesco & Verashchagina Alina, 2004. "Slow and Steady Wins the Race? An Appraisal of Ten Years of Economic Transition," Economia politica, Società editrice il Mulino, issue 3, pages 437-458.
  10. Greenaway, David & Torstensson, Johan, 2000. "Economic Geography, Comparative Advantage and Trade within Industries: Evidence from the OECD," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 15, pages 260-280.
  11. Peter Huber, 2004. "Intra-national Labour Market Adjustment in the Candidate Countries," WIFO Working Papers 218, WIFO.
  12. Karoly Fazekas, 2000. "The impact of foreign direct investment inflows on regional labour markets in Hungary," Budapest Working Papers on the Labour Market 0008, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  13. Michaël Freudenberg & Françoise Lemoine, 1999. "Central and Eastern European Countries in the International Division of Labour in Europe," Working Papers 1999-05, CEPII research center.
  14. Venables, Anthony J, 1993. "Equilibrium Locations of Vertically Linked Industries," CEPR Discussion Papers 802, C.E.P.R. Discussion Papers.
  15. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  16. Sandrine CAZES & Alena NESPOROVA, 2001. "Labour market flexibility in the transition countries: How much is too much?," International Labour Review, International Labour Organization, vol. 140(3), pages 293-325, 09.
  17. Jens Suedekum, 2003. "Increasing Returns and Spatial Unemployment Disparities," ERSA conference papers ersa03p44, European Regional Science Association.
  18. Mouhoud, El Mouhoub & Jennequin, Hugues & Dupuch, Sébastien, 2004. "EU enlargement : what does it change for the european economic geography," Economics Papers from University Paris Dauphine 123456789/1859, Paris Dauphine University.
  19. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
  20. Jan Svejnar, 2002. "Transition Economies: Performance and Challenges," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 3-28, Winter.
  21. Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766, July.
  22. Traistaru, Iulia & Nijkamp, Peter & Longhi, Simonetta, 2002. "Regional specialisation and location of industrial activity in accession countries," ERSA conference papers ersa02p136, European Regional Science Association.
  23. Andrew Newell & Francesco Pastore, 2000. "Regional Unemployment and Industrial Restructuring in Poland," CELPE Discussion Papers 51, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.
  24. Jeffrey A. Frankel & Andrew K. Rose, 1996. "The Endogeneity of the Optimum Currency Area Criteria," NBER Working Papers 5700, National Bureau of Economic Research, Inc.
  25. repec:oup:qjecon:v:112:y:1997:i:4:p:1091-1126 is not listed on IDEAS
  26. Bornhorst, Fabian & Commander, Simon, 2004. "Regional Unemployment and its Persistence in Transition Countries," IZA Discussion Papers 1074, Institute for the Study of Labor (IZA).
  27. Simon, Curtis J & Nardinelli, Clark, 1992. "Does Industrial Diversity Always Reduce Unemployment? Evidence from the Great Depression and After," Economic Inquiry, Western Economic Association International, vol. 30(2), pages 384-97, April.
  28. Tito Boeri & Katherine Terrell, 2001. "Institutional Determinants of Labor Reallocation in Transition," William Davidson Institute Working Papers Series 384, William Davidson Institute at the University of Michigan.
  29. Dewatripont, M & Roland, G, 1992. "The Virtues of Gradualism and Legitimacy in the Transition to a Market Economy," Economic Journal, Royal Economic Society, vol. 102(411), pages 291-300, March.
  30. repec:oup:qjecon:v:100:y:1985:i:1:p:57-79 is not listed on IDEAS
  31. Gabor Kertesi & Janos Kollo, 2003. "The Employment Effects of Nearly Doubling the Minimum Wage - The Case of Hungary," Budapest Working Papers on the Labour Market 0306, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  32. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  33. Karoly Fazekas, 2003. "Effects of foreign direct investment on the performance of local labour markets - The case of Hungary," Budapest Working Papers on the Labour Market 0303, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  34. Henry W. Herzog, 2000. "Plant Scale, Industry Agglomeration, and the Outlook for Regional Employment in Central European Economies," Journal of Regional Science, Wiley Blackwell, vol. 40(3), pages 499-521.
  35. Boeri, Tito & Scarpetta, Stefano, 1996. "Regional mismatch and the transition to a market economy," Labour Economics, Elsevier, vol. 3(3), pages 233-254, October.
  36. Walsh, Patrick Paul, 2003. "The cyclical pattern of regional unemployment flows in Poland," Economic Systems, Elsevier, vol. 27(2), pages 155-169, June.
  37. Philippe Aghion & Olivier J. Blanchard, 1994. "On the Speed of Transition in Central Europe," NBER Chapters, in: NBER Macroeconomics Annual 1994, Volume 9, pages 283-330 National Bureau of Economic Research, Inc.
  38. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
  39. Abraham, Katharine G & Katz, Lawrence F, 1986. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 507-22, June.
  40. Berg Andrew, 1994. "Does Macroeconomic Reform Cause Structural Adjustment? Lessons from Poland," Journal of Comparative Economics, Elsevier, vol. 18(3), pages 376-409, June.
  41. J. Paul Elhorst, 2003. "The Mystery of Regional Unemployment Differentials: Theoretical and Empirical Explanations," Journal of Economic Surveys, Wiley Blackwell, vol. 17(5), pages 709-748, December.
  42. Tito Boeri, 1994. ""Transitional" unemployment," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 2(1), pages 1-25, 03.
  43. Falvey, Rodney E., 1981. "Commercial policy and intra-industry trade," Journal of International Economics, Elsevier, vol. 11(4), pages 495-511, November.
  44. Jan Svejnar, 2002. "Labor Market Flexibility in Central and East Europe," William Davidson Institute Working Papers Series 496, William Davidson Institute at the University of Michigan.
  45. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-93, August.
  46. repec:oup:qjecon:v:103:y:1988:i:4:p:715-28 is not listed on IDEAS
  47. Blanchflower, David G., 2001. "Unemployment, Well-Being, and Wage Curves in Eastern and Central Europe," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 364-402, December.
  48. Philippe Aghion & Olivier Jean Blanchard, 1994. "On the Speed of Transition Central Europe," NBER Working Papers 4736, National Bureau of Economic Research, Inc.
  49. Eduardo Borensztein & Dimitri G. Demekas & Jonathan D. Ostry, 1993. "An Empirical Analysis of the Output Declines in Three Eastern European Countries," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 1-31, March.
  50. Bernard Funck & Lodovico Pizzati, 2002. "Labor, Employment, and Social Policies in the EU Enlargement Process : Changing Perspectives and Policy Options," World Bank Publications, The World Bank, number 15235.
  51. Boeri, Tito, 1997. "Labour-Market Reforms in Transition Economies," Oxford Review of Economic Policy, Oxford University Press, vol. 13(2), pages 126-40, Summer.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp1565. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.