Specificity of Skills and Reallocation

This chapter discusses implications, from a European perspective, of the theory concerning the specificity of skill acquisition. It also discusses how institutions such as those giving employment protection induce workers to specialize more in sectors or occupations, as their expected horizon regarding job security is longer. Evidence of the large labour reallocation that Europe has faced, or is currently facing, both in the Eastern and Western countries, is presented, focusing on Poland and Estonia. The discussion also tackles how one can measure the degree of specificity of skills as well as skill obsolescence in periods of reallocation. The effect of macroeconomic shocks (the transition to a market economy in the early 1990s and European Enlargement in the late 1990s) on Poland and Estonia are also examined.