In Search of Opportunities? The Barriers to More Efficient Internal Labor Mobility in Ukraine

Maintaining the Momentum of Decentralisation in Ukraine

“…Internal labour market mobility is low in Ukraine because substantial constraints increase migration costs and reduce the incentives to move to other regions with better economic prospects. It is estimated that, controlling for the size and number of regions, internal migration rates in Ukraine are about half of what would be expected compared to other countries (Koettl et al, 2014). This is confirmed by findings from the EBRD/World Bank "Life in Transition" Surveys: in 2010, only 0.9% of Ukrainians intended to move to other parts of the country, one of the lowest rates among 32 countries in Europe and Central Asia.…”

“…Therefore, the sale of residential property in a lagging region is not enough to finance the acquisition of new housing in a destination with better economic prospects. Ukraine's residential mortgage market reached a peak of 11% of GDP in 2009: this is well below the EU average (51.8% of GDP), making it one of the smallest mortgage markets in Europe, along with Bulgaria and Slovenia (Koettl et al, 2014).…”

“…Besides, the few Ukrainians contributing to interregional labour mobility are not always seeking better labour opportunities: "push factors" (economic constraints and cuts in public spending in the regions of origin) appear to be stronger drivers of internal migration than "pull factors" (better education/job opportunities). This limits the efficient reallocation of human resources within the country (Koettl et al, 2014;World Bank, 2015).…”

“…Ukraine has a very high rate of home ownership: according to the 2010 Household Budget Survey, 95% of households owned the home they lived in, while only 2.4% were tenants from private owners and the rest tenants from public institutions (such as city administrations, universities, etc.). Extremely high home ownership discourages mobility because the perceived cost of staying in one's home is low compared with the high transaction costs of relocating (Koettl et al, 2014). This translates into an underdeveloped rental housing market, which increases the cost of rental housing.…”

“…most landlords and tenants do not conclude formal rental agreements. Over the long term, this increases uncertainty about the risks of the rental agreements, inciting migrants to rely on personal networks such as family and friends, which increases the transaction costs linked to migration (Koettl et al, 2014). It also means that migrant tenants usually cannot register with local authorities at their new place of residence because a copy of the rental contract is required for migrant tenants to register.…”