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

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