Plant scale, industry agglomeration, and the outlook for regional employment in Central European economies

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.