Unemployment Convergence in Transition

Katrencik, David and Tyrowicz, Joanna and Wojcik, Piotr (2008): Unemployment Convergence in Transition.

Abstract

In this paper an attempt is made to inquire the dynamics of regional unemployment rates in transition economies. We use policy relevant NUTS4 unemployment rates for transition economies characterised by both relatively intense (Poland, Slovaka) and relatively mild labour market hardships (namely Czech Republic). We apply diverse analytical techniques to seek traces of convergence, including beta - and sigma-convergence as well as time-series approach.

Results in each of the countries suggest no support in favour of beta-type convergence, i.e. convergence of levels. Even controlling for nation-wide labour market outlooks (conditional convergence) does not provide any support to this hypothesis. Further, regions with both very high and very low unemployment show signs of high persistence and low mobility in the national distribution, while the middle ones tend to demonstrate higher mobility and essentially no regional unemployment differentials persistence. This diagnosis is confirmed by sigma-convergence analysis which indicates no general divergence or convergence patterns. Transitions seem to be more frequent, but at the same time less sustainable for middle range districts, while movements up and down the ladder occur frequently for the same districts.

Findings allow to define the patterns of local labour market dynamics, pointing to differentiated divergence paths. Importantly, these tendencies persists despite cohesion policies financing schemes, which allocate relatively more resources to deprived regions in all these countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: unemployment, beta-type convergence, sigma-type convergence, stochastic convergence, social cohesion
• Subjects: R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R5 - Regional Government Analysis > R58 - Regional Development Planning and Policy; J - Labor and Demographic Economics > J1 - Demographic Economics > J18 - Public Policy; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R23 - Regional Migration ; Regional Labor Markets ; Population ; Neighborhood Characteristics

References

Huber, P.: 2007, Regional Labour Market Developments in Transition: A Survey of the Empirical Literature, European Journal of Comparative Economics 4(2), 263 - 298.

Im, K. S., Pesaran, M. H. and Shin, Y.: 2003, Testing for Unit Roots in Heterogeneous Panels, Journal of Econometrics 115(1), 53{74.