Hw. Herzog, Plant scale, industry agglomeration, and the outlook for regional employment in Central European economies, J REG SCI, 40(3), 2000, pp. 499-521
A common outcome among Central European transition economics is the signifi
cant variation in regional unemployment rates, a condition symptomatic of a
llocative inefficiency in the labor market. Several studies attribute such
variation, at least in part, to large vertically integrated industrial comp
lexes erected during the period of central planning, and in turn to subsequ
ent employment adjustment that operates to the disadvantage of local worker
s during transition. In this study I provide a test of this hypothesis by e
xamining the correlates of local employment change at the outset of reforms
, and specifically adjustment triggered by extreme variation in local plant
size and scale externalities.