Abstract
Ukraine's economy lacks dynamism, and this is both the cause and the effect of people not moving across the regions. The rate at which Ukrainians move from one region to another within the country is only half of what would be expected in comparison with other countries. This paper examines the barriers that prevent workers from moving within Ukraine, using information from focus group discussions and expert surveys. It also offers recommendations for creating greater labor mobility in Ukraine through addressing institutional bottlenecks and defines five key areas for improvement, including the population registry system, housing and credit markets, vocational education and training systems, labor market institutions, and the social welfare system.
Highlights
1 Introduction The transition to a market economy in many Eastern European countries has been typically accompanied by a significant shift from widely-dispersed industries to a concentration of capital and production in a few areas
Labor has largely mirrored the movement of capital and production, leading to large economic gains
The rate at which Ukrainians move from one region to another within the country is only half of what we would expect it to be when comparing to other countries
Summary
The transition to a market economy in many Eastern European countries has been typically accompanied by a significant shift from widely-dispersed industries to a concentration of capital and production in a few areas. Internal labor mobility is low and inefficient because of weaknesses in five main areas: (i) administrative procedures, reflected in a population registry system that binds people to their place of residence and increases the costs of internal migration; (ii) underdeveloped housing and credit markets that make housing in leading regions unaffordable to potential migrants, the poor; (iii) insufficient human capital, as people in lagging regions often lack the necessary skills to access better economic opportunities in high productivity, modern sectors in the leading regions; (iv) weak formal labor market institutions that sustain labor market and wage rigidities, encourage informality and do not provide workers with enough reliable information about job openings and labor market conditions; and (v) social benefits that are tied to the officially registered place of residence and often discourage relocation to another area Individual sociopsychological factors such as strong ties to families, friends and local community and overall reluctance of Ukrainians to relocate, even for a better job and living standards, are important constraints to mobility frequently mentioned by experts and focus group informants.
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