ENLARRE · Labour Market Adjustment and the EU Enlargement
FP6 — Marie Curie Actions (Human Resources and Mobility)
- Duration
- 2005-11-01 → 2007-03-31
- EU contribution
- €145,050
- Participants
- 1
- Scheme
- EIF
Lines connect the coordinator with its partners. CORDIS does not always give exact coordinates for projects before 2014. These points are placed at city or country level.
Results in brief
Final Activity Report Summary - ENLARRE (Labour Market Adjustment and the EU Enlargement)
This project has two goals. It first aims at studying the consequences of large reallocation shocks in the presence of specific skills in the labour market. The second part is an empirical application focused on the European enlargement process. While most economic analyses highlight the expected long term gains that are likely to emerge from trade liberalisation, this project studies the short and medium term labour market impact of the enlargement for different groups of the population, depending on the transferability of their skills. Our findings clearly suggest that workers endowed with vocational skills are likely to suffer higher wage losses, longer unemployment spells and a higher probability of exiting the labour market towards early retirement than workers with general skills (or general education) during the adjustment period. We next argue that the lack of transferability of skills in a large fraction of the population is likely to have important consequences for the macroeconomy. To illustrate this claim, we build a simple theoretical framework in which young agents' careers are heavily determined by the type of initial education, and analyse the transition to a new steady-state after a sectorial demand shift. In this framework, we show that in the absence of mobility it can take as much as a generation for the economy to absorb a sectorial reallocation shock. We conclude showing that our modelling structure is capable of capturing the recent experiences of two economies with very different institutional frameworks: Estonia and Poland. When the model is calibrated using data from these two countries, we show that the Polish labour market, endowed with a much larger population exhibiting specific skills, displays higher and more persistent unemployment in the aftermath of a reallocation shock. The recent experience in these two economies is consistent with this observation.
Data: CORDIS, © European Union
Project objective
The consequences of large macroeconomic shocks such as the EU Enlargement have to be analyzed in the context of imperfect labour markets. This project proposes to build a two-sector model of search frictions and specific human capital in which young agents chose the type of schooling, specific to a sector.In this context, the transition to a new steady-state when one of the sector expands and the other declines can be analyzed. The empirical predictions from the theoretical framework are contrasted with the data. We plan to use labour force data from two different Eastern European economies (a large economy with rigid labour markets, Poland and a small open economy with increased flexibility, Estonia), in an attempt to measure the costs of the transition.To this purpose, this project proposes to measure wage mobility and notably wage losses of displaced workers and employment and unemployment transitions for workers with different human capital endowments.
Original text from CORDIS.
Participants
- CSEF (CENTER FOR STUDIES IN ECONOMICS AND FINANCE) UNIVERSITY OF SALERNO · FISCIANO (SA)CoordinatorCity levelItaly
Links
Data: CORDIS, © European Union