Regional mismatch and the transition to a market economy

Regional unemployment differentials in transition countries are large by western standards. A further widening of these disparities has been prevented by a slowing down of restructuring and large flows from unemployment to non-participation in high unemployment regions. Wage differentials are only mildly increasing in response to regional unemployment differentials and there is little labour mobility across regions. A distinguishing feature of the dynamics of regional disparities is the apparent feedback from widening unemployment differentials to the pace of restructuring. The regional dispersion of employment reductions displays less persistence than the dispersion of unemployment rates.