Exploring regional differences in the regional capacity to absorb displacements

Extract: Every year there is substantial turbulence in economies with respect to establishing new firms and business closures. Job displacement, i.e. an involuntary loss of jobs due to economic downturns or structural changes affects millions of workers each year. A recent cross-country comparison by the Organisation for Economic Co-operation and Development (OECD) (2013) reveals that displacements affect 2–7 percent of employees every year. In the Swedish case, an average displacement rate of about 2 percent is reported for the time period 2000–2008. According to Tillvaxtanalys (2009)1 more than 100 000 Swedish employees lose their jobs annually due to business closures.2 Through the process of creative destruction, in which old and obsolete firms exit due to the entry of new and more productive firms, the resources used in the exiting firms are reallocated and possibly more efficiently used in the new firms. However, in some cases displaced workers are not able to find a new job, especially if, for example, the employee’s competences do not match the current demands in the labor market. Furthermore, the possibilities to find a new job after a closure may vary substantially depending on the regional conditions in the labor market. It may, for instance, be more difficult to find a new job after a business closure if the unemployment rate in the region is already high or if the displacement is connected to the closure of a locally dominant firm.

Nyström, K., & Viklund Ros, I. (2017). Exploring regional differences in the regional capacity to absorb displacements. In C. Karlsson, M. Andersson, & L. Bjerke (Eds.), Geographies of Growth (pp. 19-47). Cheltenham, UK: Edward Elgar Publishing. DOI: 10.4337/9781785360602.00009