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Twin peaks in regional unemployment and returns to scale in job-matching in the Czech Republic

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  • Profit, Stefan

Abstract

The regional distribution of unemployment rates in the Czech Republic over the transition period is shown to be characterized by twin peaks, e.g. a high and a low unemployment equilibrium. The emergence of strong regional disparities at the beginning of the 1990s can, at least partially, be explained by regionally different degrees of competition between the emerging private sector and state-owned enterprises for skilled labor and the role of on-the-job transitions on the parameters of the matching function. This study presents a formalization of these effects and estimates empirical matching functions for a panel of labor market districts of the Czech Republic between January 1992 and July 1994. When time-series properties of unemployment to job exits are taken into account and dynamic panel estimators are applied, the Czech matching function is shown to exhibit increasing returns to scale, being consistent with multiple unemployment equilibria. Considering variables, which approximate the degree of job competition of employed workers in the search process, reveals strong heterogeneity of matching parameters with respect to the relative position of districts in the regional distribution of unemployment and vacancy rates, and the share of district employment in the private sector.

Suggested Citation

  • Profit, Stefan, 1997. "Twin peaks in regional unemployment and returns to scale in job-matching in the Czech Republic," SFB 373 Discussion Papers 1997,63, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    • Handle: RePEc:zbw:sfb373:199763
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    Cited by:

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    2. Daniel Munich & Jan Svejnar & Katherine Terrell, 2001. "Worker-firm Matching and Unemployment in Transition to a Market," Development and Comp Systems 0012011, University Library of Munich, Germany.
    3. Jekaterina Dmitrijeva & Mihails Hazans, 2007. "A Stock–Flow Matching Approach to Evaluation of Public Training Programme in a High Unemployment Environment," LABOUR, CEIS, vol. 21(3), pages 503-540, September.
    4. Stefan Profit & Stefan Sperlich, 2004. "Non-uniformity of job-matching in a transition economy - A nonparametric analysis for the Czech Republic," Applied Economics, Taylor & Francis Journals, vol. 36(7), pages 695-714.
    5. Munich, Daniel & Svejnar, Jan, 2009. "Unemployment and Worker-Firm Matching Theory and Evidence from East and West Europe," Policy Research Working Paper Series 4810, The World Bank.
    6. Pablo de Pedraza, 2008. "Labour Market Matching Efficiency In The Czech Republic Transition," William Davidson Institute Working Papers Series wp920, William Davidson Institute at the University of Michigan.

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    More about this item

    Keywords

    returns to scale; Czech Republic; regional labor markets; matching functions; multiple unemployment equilibria; on-the-job search; job-competition;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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