Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153019
Authors: 
Lamo, Ana
Messina, Julián
Wasmer, Etienne
Year of Publication: 
2006
Series/Report no.: 
ECB Working Paper 585
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.
Subjects: 
Enlargement
Labor Reallocation
Matching
Specific Skills
Vocational Education
JEL: 
J30
Document Type: 
Working Paper
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