Adjustment to Regional Labour Market Shocks

Aki Kangasharju (aki.kangasharju@etla.fi) and Sari Pekkala Kerr

No 274, Discussion Papers from VATT Institute for Economic Research

Abstract: This paper analyses regional labour market adjustment in the Finnish provinces during 1976-2000. It investigates the inter-relations of employment, unemployment, labour force participation and migration to see how a change in region-specific and total labour demand is adjusted. The analysis reveals that a region-specific labour demand shocks adjust mainly via participation whereas total shocks are adjusted by unemployment. The region-specific component of labour demand shock has shorter-lived effects on unemployment and participation, but its effect on employment is permanent. Conversely, total shocks leave no permanent effect. Migration is more important in the region-specific case where, after a few years, it gets a large role in the adjustment process.

Keywords: Labour market, employment, unemployment, migration, shock adjustment, Economic growth, Taloudellinen kasvu, Labour market, Työmarkkinat, Regional development, Aluekehitys, Effectiveness of public services, Julkisten palvelujen vaikuttavuus, J600 - Mobility, Unemployment, and Vacancies: General, R230 - Urban, Rural, and Regional Economics: Regional Migration; Regional Labor Markets; Population, (search for similar items in EconPapers)
Date: 2002
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