Regional labor markets in Finland: Adjustment to total versus region-specific shocks

Year Published: 2002

Authors: Sari Pekkala, Aki Kangasharju

Source: Papers in Regional Science

This article analyses regional labor market adjustment in the Finnish provinces during 1976–2000. We investigate the inter-relations of employment, unemployment, labor force participation, and migration to see how a change in region-specific and total labor demand is adjusted. The analysis reveals that region-specific labor demand shocks adjust mainly via participation, whereas total shocks are adjusted by unemployment. The region-specific component of labor 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 acquires a large role in the adjustment process.

 

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