Local unemployment in Poland: rural–urban contrasts

Abstract

Unemployment continues to bedevil Poland, albeit with striking sub-national differences, which this article seeks to explain using random effects error component two-stage estimation for the country's NUTS 4 (nomenclature des unites territoriales statistiques) level powiats. Given the economy's peculiar configuration under communism, with its large private agricultural sector, emphasis is placed on rural–urban differences. While less densely populated areas do suffer higher unemployment rates, the effect is moderated by hidden unemployment in farming. On the other hand, powiats that housed the ex-state farms suffer a negative long-term legacy. Other notable results include an evident positive impact of foreign capital on local labour market fortunes.

Acknowledgements

The authors wish to acknowledge the financial support of DFID for research project R8097 and the helpful comments of the anonymous referee upon the previous version of this article.

Notes

¹ The four French overseas regions (Guadeloupe, Martinique, Guyane and Réunion) are excluded from this comparison.

² To our knowledge, the only analytical, as opposed to descriptive, work at this level, whether in English or Polish, are two evolving working papers by Joanna Tyrowicz and Piotr Wójcik of the Faculty of Economics, Warsaw University. Even these, however, are concerned with the statistical convergence properties of the unemployment series rather than their economic modelling.

³ Unless noted to the contrary, all data referred to in this article are taken from official series compiled and held by the Polish Central Statistical Office (GUS). Precise references can be found in Ingham et al. (2008).

⁴ As a point of reference, the powiats, with an average population size of just over 103 000, are about three-quarters of the size of the districts that represent NUTS 4/LAU 1 regions in the UK.

⁵ International Labour Organization (ILO) consistent self-certification data are available from the quarterly Labour Force Survey, but they cannot be used at the local level.

⁶ In areas where the working population exceeds 20 000 a level of containment of 70% is deemed acceptable.

⁷ The only definition of a local labour market used in Poland is in fact based on powiat boundaries.

⁸ Notwithstanding the private ownership of the farms, the state did, however, at various times exert a strong influence over their activities, although this waned in the 1980s (Wilkin, 1989).

⁹ Sometimes generous company specific nonpecuniary benefits acted as one brake on this.

¹⁰ In fact, the planned economies have long been known to have exhibited all forms of unemployment other than that associated with business cycles (Bornstein, 1978).

¹¹ In the context of Aghion and Blanchard (1994), the hiring function should drift upwards.

¹² At higher levels of spatial aggregation, the Organization's definitions focus on the percentage of the population living in rural communities (European Commission, 1997).

¹³ The implied difference of 1.4 million people was considered ‘insignificant’ (MARD, 2002).

¹⁴ Statistical sophistry subsequently erased some two million peasant farmers from the labour market map (GUS, 2004; Ingham and Ingham, 2004).

¹⁵ The relationship between GRP and unemployment has been shown to be complex (Elhorst, 2003, p. 732).

¹⁶ The monetary volume of FDI, whether measured as a stock or a flow, is not available at the level of the powiat.

¹⁷ The measure is an approximation because some people participate even though they are outside the accepted working age limits. Commuting across local area boundaries represents a further distortion. However, other possible measures of labour supply, such as total population multiplied by the overall participation rate, lead to even more serious problems.

¹⁸ There has been much discussion in the literature on the relative merits of the fixed and random effects approaches to panel data (Nerlove, 2002). However, with time-invariant regressors (PERIPH, STATEAG, HERF, STCH₀ and STCH₁), the individual-specific variables in the fixed effects model are collinear with the constant term, hence this specification cannot be employed.

¹⁹ The negative relationship between agriculture and unemployment is the opposite of that found by Fagerberg et al. (1997) for regions within the old EU-15, where the social role of farming is much less significant.

²⁰ In this regard, it might be worth noting that OECD (2006) criticised Poland for its tardiness in completing its privatization programme.