Exploring regional differences in the regional capacity to absorb displacements

Every year there is a substantial turbulence in an economy with respect to new firm formation and business closures. Each year, according to Tillväxtanalys (2009), about 100 000 Swedish employees lose their job due to a business closure. However, the share of firm closures vary substantially across Swedish regions (Nyström, 2007; 2009) and consequently the number of workers affected by the firm closure can be expected to vary across regions. In this paper we explore the patterns of regional displacements and to what extent there are differences in the regional capacity to re-employ displaced workers within one year. We use individual-firm level data to identify all establishment closures and re-employments in Sweden during the period 2001-2009. On average the share of displaced workers is 1.22 percent, but the regional variation is substantial. We find that the regional share of re-employments within the region where the displaced worker was employed varies between 15 and 85 percent. We do not find any correlation between the share of displacements and the capacity to absorb displaced workers.