Path dependence and the persistence of unemployment in the Slovak Republic

This Country Focus explores the persistence of high unemployment in the Slovak Republic during the last two decades. Given broadly comparable growth models and institutions, particular attention is paid to differences in performance between the Slovak and Czech labour markets. While a companion paper looks in more detail at post-crisis development, adverse macroeconomic shocks experienced during the early and late nineties are reviewed here within a framework a la Jackman, Pisarrides and Savouri (1990). Regional macroeconomic statistics and micro data on vacancies and job flows reveal a situation of persisting regional underemployment due to slow and protracted economic restructuring in central and eastern Slovakia. As the latter, to some extent, appears to be still on-going, the unemployment rate is still to date entrenched in laggard regions while long term unemployment has remained among the highest in the EU throughout the 2000s, a decade largely characterised by a booming economy.