Structural Change and Regional Labour Market Imbalances in Transition

The new century has brought unprecedented change to the economic and political geography of the European continent. Most former socialist countries in Central and Eastern Europe have already joined the European Union. Other countries in the area are likely to follow in the near future. Entering the EU and opening up to world trade, Central and Eastern European countries are undergoing what Fabrizio, Leigh and Mody (2009) have called a second transition, after that from a planned to a market economy. In addition, they are exposed to many potential sources of structural change. For instance, the global financial crisis due to the explosion of the speculative bubble linked to subprime loans is changing the composition of industry in every country. All these dramatic changes are already generating consequences on local labour markets. Often entire regions of Europe and of the United States are put under distress because of this and governments are called for immediate action. Thinking of the way of working of structural change and how it affects the labour market is of policy relevance particularly in the aftermath of the global financial crisis. In fact, as noted, for instance, in a recent report for the Australian government (Howard, 2009), looking at past experiences of intervention against structural unemployment might help preventing sectoral shifts from generating permanent shocks to the employment rate.