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Creative destruction, destructive destruction and labour market dynamics

Research project In times of economic turmoil, it’s easy to focus on recurrent news of contracting industries and plants, and stories of how crises may negatively affect workers and the long-term economic development of regions. But what are the long-term effects of crises for individuals, plants and regions?

Using unique Swedish longitudinal micro-data that matches workers with firms and regions from the 1960s until today, this project will analyze which mechanisms lead to a so called ‘creative destruction’ and which lead to ‘destructive destruction’. The project will thus deepen our understanding about which individuals, firms and regions that are able to benefit from qualitative economic change, and under which circumstances this is the case.

Head of project

Project overview

Project period:

2014-01-01 2016-12-31

Funding

The Swedish Research Council for Health, Working Life and Welfare, 2014-2016: SEK 4,730,000

Participating departments and units at Umeå University

Department of Geography, Faculty of Social Sciences

Research subject

Economic history, Human geography

Project description

In times of economic turmoil, it’s easy to focus on recurrent news of contracting industries and plants, and stories of how crises may negatively affect workers and the long-term economic development of regions. From a Schumpeterian perspective however, crises can be regarded as a necessary component of qualitative economic change. Despite this potentially positive outcome of such destruction, little is still known about when a regional crisis may be creative and lead to new successful development paths, or when regions become trapped in a negative development path.

Using unique Swedish longitudinal micro-data that matches workers with firms and regions from the 1960s until today, this project will analyze which mechanisms lead to a so called ‘creative destruction’ for individuals and regions, and which lead to ‘destructive destruction’. The project will thus deepen our understanding about which individuals, firms and regions are able to benefit from qualitative economic change, and under which circumstances this is the case.

The chosen time frame (1960-2010) comprises an intensive period of structural change, during which the Swedish economy gradually has transformed from its focus on traditional manufacturing, towards more knowledge intensive production of goods and services. Since the project intends to assess how regional crises (e.g., massive layoffs and closedowns) trigger labour mobility that may lead to either creative or destructive destruction, we will apply econometric models to analyse the propensity for labour flows between different types of labour market positions in space (e.g., work, migration, unemployment, education, etc.) and how flows influence the creation and setup of new organizational and regional resources.

This project will thus produce important insights on how labour market dynamics transforms the industrial portfolio of regions, and how this leads to varying preconditions for sustaining growth and welfare in different regions.