Regional Labour Market Adjustment: Are Positive and Negative Shocks Different?

Abstract

This paper investigates the evolution of regional disparities in Finland between 1988 and 1997. The analysis focuses on per capita GDP and its subcomponents, particularly labour productivity, jobs and population. The results show, first, that the evolution of labour productivity and the number of jobs account for the emerged regional divergence of per capita GDP during 1990-1995. Second, even though inter-regional migration tends to have convergent effects on regional per capita GDP, its effect was not strong enough during 1990-1995: the divergence of productivity and jobs dominated. Third%2C among divergent factors (productivity and jobs), manufacturing contributes the most to the divergence of per capita GDP, whereas private services is the main convergent sector. Finally, the divergence of regional productivity (or jobs) in a sector does not necessarily contribute to regional divergence of overall per capita GDP, since the most productive activity (or most of the jobs) in some sector are not necessarily located in regions where per capita GDP is the highest.