Heterogeneous determinants of local unemployment in Poland

Abstract

We identify determinants of large disparities in local unemployment rates across Poland. Using an extensive panel data-set on the NUTS-4 level (i.e. the poviats level, or districts or counties level) we examine a wide range of determinants of local unemployment. Our research examines two groups of the determinants: one related to equilibrium theory and the other related to disequilibrium theory of local unemployment. We find that demographics, education and sectoral employment composition exert a stronger impact over rates of local unemployment than various demand factors. The impact of the determinants, while robust for outliers, is not homogeneous across Polish regions. In particular, in the most depressed local labour markets, skill improvement programmes do not appear to work and unemployment rates are relatively less responsive to investment. Our research suggests that there is no easy cure for local unemployment in Poland, but a few policies have the potential to slightly reduce existing disparities.