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The Mystery of Regional Unemployment Differentials: Theoretical and Empirical Explanations

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J. Paul Elhorst

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Abstract

This paper provides an integrated overview of theoretical and empirical explanations used in the applied literature on regional unemployment differentials. On the basis of 41 empirical studies, four different model types covering nine theoretical constructs of regional unemployment determination and 13 sets of explanatory variables are identified. The overall conclusion is that theoretical and empirical explanations help to reduce the weaknesses in each other. While theory is found to predict that the regional unemployment rate depends on labour supply factors "a collection of factors which affect natural changes in the labour force, labour force participation, migration and commuting", labour demand factors and wage-setting factors, it is the empirical studies that provide a more profound understanding of the explanatory variables involved. Conversely, whereas most empirical studies provide clear-cut explanations for the signs of the explanatory variables, it is theory that shows that some of these explanations might be out of proportion. By grouping many studies together, this paper shows that there are indeed clear-cut trends. Copyright Blackwell Publishing Ltd, 2003.

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Article provided by Blackwell Publishing in its journal Journal of Economic Surveys.

Volume (Year): 17 (2003)
Issue (Month): 5 (December)
Pages: 709-748
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Handle: RePEc:bla:jecsur:v:17:y:2003:i:5:p:709-748

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  1. Christian Merkl & Dennis J. Snower, 2007. "Escaping the Unemployment Trap — The Case of East Germany," Kiel Working Papers 1309, Kiel Institute for the World Economy. [Downloadable!]
  2. Annette Zeilstra & Paul Elhorst, 2006. "Unemployment Rates At the Regional and National Levels of the European Union: An Integrated Analysis," ERSA conference papers ersa06p73, European Regional Science Association. [Downloadable!]
  3. McArthur, David & Thorsen, Inge & Ubøe, Jan, 2008. "An agent-based computational approach to explaining persistent spatial unemployment disparities," Discussion Papers 2008/17, Department of Finance and Management Science, Norwegian School of Economics and Business Administration. [Downloadable!]
  4. Blien, Uwe & Sanner, Helge, 2006. "Structural change and regional employment dynamics," IAB Discussion Paper 200606, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
    Other versions:
  5. J.Paul Elhorst, 2005. "Models for Dynamic Panels in Space and Time - an Application to Regional Unemployment in the EU," ERSA conference papers ersa05p81, European Regional Science Association. [Downloadable!]
  6. Annekatrin Niebuhr & Silvia Stiller, 2004. "Integration and Labour Markets in European Border regions," ERSA conference papers ersa04p29, European Regional Science Association. [Downloadable!]
  7. Kenmei Tsubota, 2009. "Agglomeration and wage bargaining," KIER Working Papers 675, Kyoto University, Institute of Economic Research. [Downloadable!]
  8. Roberto Bande & Marika Karanassou, 2007. "Labour Market Flexibility and Regional Unemployment Rate Dynamics: Spain 1980-1995," IZA Discussion Papers 2593, Institute for the Study of Labor (IZA). [Downloadable!]
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  9. GAMARRA, José R., 2006. "¿Cómo se comportan las tasas de desempleo en siete ciudades colombianas?," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO - FACULTAD DE ECONOMÍA. [Downloadable!]
  10. Blien, Uwe & Hirschenauer, Franziska & Arendt, Manfred & Braun, Hans Jürgen & Gunst, Dieter-Michael & Kilcioglu, Sibel & Kleinschmidt, Helmut & Musati, Martina & Roß, Hermann & Vollkommer, Dieter & , 2004. "Typisierung von Bezirken der Agenturen für Arbeit (Classification of employment office areas)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 37(2), pages 146-175. [Downloadable!]
  11. Darja Boršiè & Alenka Kavkler, 2009. "Duration of Regional Unemployment Spells in Slovenia," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 7(2), pages 123-146. [Downloadable!]
  12. Marcello Signorelli & Enrico Marelli, 2007. "Institutional change, regional features and aggregate performance in eight EU’s transition countries," Quaderni del Dipartimento di Economia, Finanza e Statistica 37/2007, Università di Perugia, Dipartimento Economia, Finanza e Statistica. [Downloadable!]
  13. Joerg Lingens & Joerg Heining, 2006. "Social Interaction in Regional Labour Markets," ERSA conference papers ersa06p43, European Regional Science Association. [Downloadable!]
  14. Maria Francesca Cracolici & Miranda Cuffaro & Peter Nijkamp, 2007. "Geographical Distribution of Unemployment: An Analysis of Provincial Differences in Italy," Tinbergen Institute Discussion Papers 07-065/3, Tinbergen Institute. [Downloadable!]
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  15. Anna Maria Ferragina & Francesco Pastore, 2005. "Mind the Gap: Unemployment in the New EU Regions," IZA Discussion Papers 1565, Institute for the Study of Labor (IZA). [Downloadable!]
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  16. Hilary Ingham & Mike Ingham & Jan Herbst, 2008. "Why do Local Unemployment Rates in Poland Vary so Much?," Working Papers 005613, Lancaster University Management School, Economics Department. [Downloadable!]
  17. Hilary Ingham & Mike Ingham & Jan Herbst, 2005. "Local unemployment in Poland," Working Papers 002458, Lancaster University Management School, Economics Department. [Downloadable!]
  18. Enrique López-Bazo & Tomás Del Barrio & Manuel Artís, 2005. "Geographical distribution of unemployment in Spain," Regional Studies, Taylor and Francis Journals, vol. 39(3), pages 305-318, May. [Downloadable!] (restricted)
  19. Merkl, Christian & Snower, Dennis J., 2008. "Escaping the Unemployment Trap: The Case of East Germany," IZA Discussion Papers 3681, Institute for the Study of Labor (IZA). [Downloadable!]
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