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Are Specific Skills an Obstacle to Labor Market Adjustment? Theory and an Application to the EU Enlargement

Author

Listed:
  • Ana Lamo

    (DG Reseach - ECB)

  • Julian Messina

    (UdG - Universitat de Girona = University of Girona)

  • Etienne Wasmer
Abstract
We argue that the existence of large amounts of specific human capital makes costly and slows down the adjustment in the labor market after large reallocation shocks. To illustrate this point we build a theoretical framework in which young agents' career is heavily determined by initial education, and analyze the transition to a new steady-state after a sectoral demand shift. An interesting case study is the EU enlargement, which led to modernization of many sectors in eastern countries and to a fast decline of traditional industries. Using labor force data from a large economy with rigid labor markets, Poland, and a small open economy with increased flexibility, Estonia, we document and find support for our claim. Quantitative exercises suggest that the overspecializaton of the labor force in Poland explain to a large extent the much higher and persistent unemployment compared to Estonia during the period of EU enlargement.

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  • Ana Lamo & Julian Messina & Etienne Wasmer, 2006. "Are Specific Skills an Obstacle to Labor Market Adjustment? Theory and an Application to the EU Enlargement," Working Papers hal-03459097, HAL.
    • Handle: RePEc:hal:wpaper:hal-03459097
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03459097
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    References listed on IDEAS

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    Cited by:

    1. Henry Ohlsson & Donald Storrie, 2012. "Long‐term effects of public policy for displaced workers in Sweden," International Journal of Manpower, Emerald Group Publishing Limited, vol. 33(5), pages 514-538, August.
    2. Vitale, Paolo, 2006. "A market microstructure analysis of foreign exchange intervention," Working Paper Series 629, European Central Bank.
    3. Wesselbaum, Dennis, 2011. "Sector-specific productivity shocks in a matching model," Economic Modelling, Elsevier, vol. 28(6), pages 2674-2682.
    4. repec:spo:wpecon:info:hdl:2441/9938 is not listed on IDEAS
    5. Bert Minne & Marc van der Steeg & Dinand Webbink, 2008. "Skill gaps in the EU: role for education and training policies," CPB Document 162, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Julia Bock-Schappelwein & Jürgen Janger & Andreas Reinstaller, 2012. "Bildung 2025 – Die Rolle von Bildung in der österreichischen Wirtschaft," WIFO Studies, WIFO, number 45200.
    7. Lamo, Ana & Messina, Julián, 2010. "Formal education, mismatch and wages after transition: Assessing the impact of unobserved heterogeneity using matching estimators," Economics of Education Review, Elsevier, vol. 29(6), pages 1086-1099, December.
    8. Jakob von Weizsäcker & Etienne Wasmer, 2007. "A better Globalisation Fund," Policy Briefs 36, Bruegel.
    9. Alain Delacroix & Etienne Wasmer, 2007. "Job and Workers Flows in Europe and the US: Specific Skills or Employment Protection?," SciencePo Working papers Main hal-01053160, HAL.
    10. Lamo, Ana & Messina, Julián & Wasmer, Etienne, 2011. "Are specific skills an obstacle to labor market adjustment?," Labour Economics, Elsevier, vol. 18(2), pages 240-256, April.
    11. Etienne Wasmer, 2006. "General versus Specific Skills in Labor Markets with Search Frictions and Firing Costs," American Economic Review, American Economic Association, vol. 96(3), pages 811-831, June.
    12. repec:hal:spmain:info:hdl:2441/9938 is not listed on IDEAS
    13. repec:hal:wpspec:info:hdl:2441/9938 is not listed on IDEAS
    14. Mondschean, Thomas & Oppenheimer, Margaret, 2011. "Regional Long-term and Short-term Unemployment and Education in Transition: The Case of Poland," The Journal of Economic Asymmetries, Elsevier, vol. 8(2), pages 23-48.
    15. Daniel Dias, 2006. "Measuring the Importance of the Uniform Nonsynchronization Hypothesis," Working Papers w200603, Banco de Portugal, Economics and Research Department.
    16. Thirunaukarasu Subramaniam & Ahmad Zubaidi Baharumshah, 2011. "Unemployment And Speed Of Adjustment In Asean-3 Economies: A Cointegration Analysis," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 56(03), pages 327-347.
    17. Wesselbaum, Dennis, 2015. "Sectoral labor market effects of fiscal spending," Structural Change and Economic Dynamics, Elsevier, vol. 34(C), pages 19-35.
    18. Ohlsson, Henry & Storrie, Donald, 2007. "Long term effects of public policy for displaced workers in Sweden – shipyard workers in the West and miners in the North," Working Paper Series 2007:19, Uppsala University, Department of Economics.
    19. repec:spo:wpmain:info:hdl:2441/9938 is not listed on IDEAS
    20. Alexandre Janiak, 2008. "Mobility in Europe - Why it is low, the bottlenecks, and the policy solutions," European Economy - Economic Papers 2008 - 2015 340, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

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    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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