Are Specific Skills an Obstacle to Labor Market Adjustment?

Ana Lamo, Julian Messina and Etienne Wasmer

No 5250, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper shows that specialized education reduces workers' mobility and hence their ability to cope with economic changes. We illustrate this point using labor force data from two countries having experienced important macroeconomic turbulence; a large economy with rigid labor markets, Poland, and a small open economy with increased flexibility, Estonia. We find that holding a vocational degree is associated with much longer unemployment duration spells and higher likelihood of leaving activity for older workers. We then build a theoretical framework in which young agents' careers are heavily determined by the type of initial education, and analyze the transition to a new steady-state after a sectoral demand shift. Quantitative exercises suggest that the over-specialization of the labor force in Poland led to much higher and persistent unemployment compared to Estonia during the period of EU enlargement. Traditional labor market institutions (wage rigidity and employment protection) lead to an increase of the unemployment gap, but to a lesser extent.

Keywords: transition countries; vocational education; EU enlargement; specific skills (search for similar items in EconPapers)
JEL-codes: J24 J4 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2010-10
New Economics Papers: this item is included in nep-edu, nep-lab and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published - published in: Labour Economics, 2011, 18 (2), 240-256

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Related works:
Journal Article: Are specific skills an obstacle to labor market adjustment? (2011)
Working Paper: Are specific skills an obstacle to labor market adjustment? (2011)
Working Paper: Are specific skills an obstacle to labor market adjustment? (2011)
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