Working Paper: CEPR ID: DP6569
Authors: Stepan Jurajda; Katherine Terrell
Abstract: Differences in regional unemployment in post-communist economies are large and persistent. We show that inherited variation in human-capital endowment across the regions of four such economies explains the bulk of regional unemployment variation there and we explore potential explanations for this outcome through related capital and labour mobility patterns. The evidence suggests that regions with high inherited skill endowments attract skilled workers as well as FDI. This mobility pattern, which helps explain the lack of convergence in regional unemployment rates, is consistent with the presence of complementarities in skill and capital. Nevertheless, we find no supporting evidence of human capital wage spillovers implied by the complementarities story. Unemployment of the least-skilled workers appears lower in areas with a higher share of college-educated labour and future research is needed to see if this finding as well as the observed migration pattern arise from different adjustments to regional shocks by education level brought about in part by Central European labour-market institutions, such as guaranteed welfare income raising effective minimum wages.
Keywords: Complementarities; Czech Republic; Human Capital; Hungary; Labour Mobility; Regional Labour Markets; Romania; Spillovers; Transition Economies; Ukraine; Unemployment
JEL Codes: E24; J0; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher shares of skilled workers (J24) | lower unemployment rates (J68) |
| lack of migration among low-skilled workers (J61) | persistent unemployment disparities (J68) |
| concentration of college-educated individuals (D29) | lower unemployment rates (J68) |
| skill levels (J24) | migration patterns (F22) |