Mind the Gap: Unemployment in the New EU Regions

46 Pages Posted: 25 Apr 2005

See all articles by Anna Ferragina

Anna Ferragina

University Tor Vergata

Francesco Pastore

Seconda Università di Napoli - Dipartimento di Discipline Giuridiche ed Economiche Italiane Europee e Comparate; IZA Institute of Labor Economics

Date Written: April 2005

Abstract

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.

Keywords: regional unemployment, structural change, labour turnover, optimal speed of transition, Central and Eastern Europe

JEL Classification: J6, P2, R1, R23

Suggested Citation

Ferragina, Anna and Pastore, Francesco, Mind the Gap: Unemployment in the New EU Regions (April 2005). Available at SSRN: https://ssrn.com/abstract=708144

Anna Ferragina

University Tor Vergata ( email )

Via di Tor Vergata
Rome, Lazio
Italy

Francesco Pastore (Contact Author)

Seconda Università di Napoli - Dipartimento di Discipline Giuridiche ed Economiche Italiane Europee e Comparate ( email )

Via Antonio Vivaldi, 43
Caserta CE, Caserta 81100
Italy

HOME PAGE: http://www.giurisprudenza.unina2.it/news.php?nid=185

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
103
Abstract Views
1,176
rank
312,886
PlumX Metrics