The dynamics of regional labor markets and active labor market policy: Swedish evidence

This paper analyses the repercussions of region-specific shocks to labor de mand. Active labor market programs have been targeted at high unemployment regions in Sweden, a faa that should influence the regional adjustment proc ess. Fears have been expressed that some of the programs may have adverse e ffects on adjustment by, for instance, locking-in displaced workers in depr essed regions. The empirical results indicate that Swedish regional adjustm ent has been comparatively rapid; labor mobility in response to shocks, for instance, appears to be high by European standards. On the whole, labor ma rket programs do not seem to have impeded regional adjustment substantially .