In this paper, we use 1991-2005 panel data on the unemployed, vacancies, inflow into unemployment, and outflow from unemployment in five former communist economies and in the western part of Germany (a benchmark western economy) to examine the evolution of unemployment together with that of inflows into unemployment and vacancies. The comparison of the transition economies with an otherwise similar and spatially close market economy is useful because it enables us to identify the main differences and similarities in the evolution of the key variables, and thus draw conclusions as to whether different or similar factors cause high unemployment.