Working Paper: CEPR ID: DP2135
Authors: Stefan Profit
Abstract: The regional distribution of unemployment rates in the Czech Republic during the transition period is shown to be characterised by twin peaks, i.e. 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 labour and the role of on-the-job transitions on the parameters of the matching function. This study presents a formalisation of these effects and estimates empirical matching functions for a panel of labour market districts of the Czech Republic between January 1992 and July 1994. When dynamics 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. This is consistent with the finding of multiple unemployment equilibria.
Keywords: regional labour markets; matching functions; returns to scale; multiple unemployment equilibria; on-the-job search; job competition; Czech Republic
JEL Codes: E24; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| earlier empirical studies (C90) | biased estimates of matching function parameters (C51) |
| increasing returns to scale in job matching (J68) | multiple unemployment equilibria (D59) |
| regional unemployment rates (R19) | job matching functions (J68) |
| competition between private sector and state-owned enterprises (L33) | efficiency of matching function (C78) |
| unemployment dynamics (J64) | job exits (J63) |
| job matching functions (J68) | job search intensity among employed workers (J29) |