Large-Scale Labour Market Restructuring and Labour Mobility: the Experiences of East Germany and Poland

A simple theoretical framework is presented, enabling the assessment of the government’s role in industrial and regional labour reallocation that follow from large-scale restructuring in the labour market. The experiences of East Germany and Poland in this regard are then compared and appraised. The main upshot is that a number of adverse incentive effects kept regional unemployment differentials high in both East Germany and Poland long after the initial transition shock. Active labour market policies (ALMPs) have apparently had little success..