Geographies of Growth
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Geographies of Growth

Innovations, Networks and Collaborations

Edited by Charlie Karlsson, Martin Andersson and Lina Bjerke

Today we can observe an increasing spatial divide as some large urban regions and many more medium-sized and small regions face growing problems such as decreasing labour demand, increasing unemployment and an ageing population. In view of these trends, this book offers a better understanding of the general characteristics and specific drivers of the geographies of growth. It shows how these may vary in different spatial contexts, how hurdles and barriers to growth in different types of regions can be dealt with, how and to what extent resources in different areas can develop, and how the potential of these resources to stimulate growth can be realized.
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Chapter 2: Exploring regional differences in the regional capacity to absorb displacements

Innovations, Networks and Collaborations

Kristina Nyström and Ingrid Viklund Ros

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. Among policy-makers there is clearly an interest in the effects of business closures. Previous Swedish large-scale closures, which have received a lot of attention from policy-makers, include, for example, Ericsson in Norrkoping 19993 (the telecom industry), Kockums in Malmo4 (the shipyard industry) and most recently SAAB in Trollhattan5 (the automobile industry). It is undoubtedly the case that the closure of locally dominant firms such as these may have a marked effect on the regional labor market. At the regional level the number of firm closures (exit rates) varies substantially (see e.g. Nystrom, 2007 and 2009, for a description of the Swedish case). However, we know little about what happens to the employees after the closure of these businesses. In order to be able to formulate welltargeted labor market policies, aimed at reducing the costs incurred to the displaced workers at the time of a plant closure, understanding how the re-employment conditions differ between regions is of great importance. In regions where the re-employment probability is low and joblessness durations are often long, large-scale closures might lead to severe consequences for the region if the displaced workers are forced to move to another region in order to become re-employed. The migration from the region then might cause further unemployment and could even worsen the economic climate. Thus, regional policy should aim at providing necessary conditions for quicker absorption of displaced workers.

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