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Is Sectoral Diversification a Solution to Unemployment? Evidence from EU Regions#

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  • Simonetta Longhi
  • Peter Nijkamp
  • Iulia Traistaru

Abstract

There is a growing interest in the academic and policy making communities in understanding the effects of sectoral specialisation on labour market performance. The existing empirical evidence, mainly based on US data, generally finds a positive correlation between sectoral specialisation and labour market indicators such as wages and unemployment. The policy implication one can draw from these results is that fostering sectoral diversification may reduce unemployment. However, this lesson may not hold for all countries. In particular, in the case of Europe, the diversity of labour market institutions may play a distinct role in shaping the relationship between sectoral specialisation and labour market performance. In this paper, we investigate the relationship between regional sectoral specialisation and regional unemployment rate in the context of different collective bargaining institutions in the EU countries. We find that collective bargaining institutions do play a role in shaping the unemployment rate differentials across regions belonging to the same country. Furthermore, the relationship between regional specialisation and the regional unemployment rate is stronger in countries with intermediate and decentralised collective bargaining institutions in comparison to countries with centralised collective bargaining institutions. Our results suggest that labour market institutions are likely to influence the outcome of policies aiming at fostering regional diversification. While such policies may result in reducing regional unemployment in countries with decentralised and intermediate levels of collective bargaining, they may not make a big difference in countries with centralised collective bargaining institutions.

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  • Simonetta Longhi & Peter Nijkamp & Iulia Traistaru, 2005. "Is Sectoral Diversification a Solution to Unemployment? Evidence from EU Regions#," Kyklos, Wiley Blackwell, vol. 58(4), pages 591-610, November.
  • Handle: RePEc:bla:kyklos:v:58:y:2005:i:4:p:591-610
    DOI: 10.1111/j.0023-5962.2005.00304.x
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    References listed on IDEAS

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    1. Combes, Pierre-Philippe & Duranton, Gilles, 2006. "Labour pooling, labour poaching, and spatial clustering," Regional Science and Urban Economics, Elsevier, vol. 36(1), pages 1-28, January.
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    Cited by:

    1. Soltwedel, Rüdiger & Krieger-Boden, Christiane, 2007. "The impact of European integration and enlargement on regional structural change and cohesion: EURECO. Final report," Open Access Publications from Kiel Institute for the World Economy 4243, Kiel Institute for the World Economy (IfW Kiel).
    2. Jesús Peiró‐Palomino & Andrés J. Picazo‐Tadeo & Vicente Rios, 2020. "Well‐being in European regions: Does government quality matter?," Papers in Regional Science, Wiley Blackwell, vol. 99(3), pages 555-582, June.
    3. Roberto Ezcurra, 2011. "Unemployment Volatility and Regional Specialization in the European Union," Regional Studies, Taylor & Francis Journals, vol. 45(8), pages 1121-1137.
    4. Peter Huber, 2009. "Regional Labour Market Disparities in an Enlarged European Union," Palgrave Macmillan Books, in: Paul Blokker & Bruno Dallago (ed.), Regional Diversity and Local Development in the New Member States, chapter 5, pages 122-165, Palgrave Macmillan.
    5. Lisa Gianmoena & Vicente Rios, 2018. "The Determinants of Resilience in European Regions During the Great Recession: a Bayesian Model Averaging Approach," Discussion Papers 2018/235, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    6. Watson, Philip & Deller, Steven, 2017. "Economic diversity, unemployment and the Great Recession," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 1-11.
    7. Nicola Pontarollo & Carolina Serpieri, 2021. "Challenges and Opportunities to Regional Renewal in the European Union," International Regional Science Review, , vol. 44(1), pages 142-169, January.
    8. Enrico Marelli & Roberto Patuelli & Marcello Signorelli, 2012. "Regional unemployment in the EU before and after the global crisis," Post-Communist Economies, Taylor & Francis Journals, vol. 24(2), pages 155-175, January.
    9. Olga Demidova & Marcello Signorelli, 2010. "The Impact of Crises on Youth Unemployment of Russian Regions: An Empirical Analysis," Quaderni del Dipartimento di Economia, Finanza e Statistica 78/2010, Università di Perugia, Dipartimento Economia.
    10. Vicente Rios, 2017. "What drives unemployment disparities in European regions? A dynamic spatial panel approach," Regional Studies, Taylor & Francis Journals, vol. 51(11), pages 1599-1611, November.
    11. Marco Percoco, 2016. "Labour Market Institutions: Sensitivity to the Cycle and Impact of the Crisis in European Regions," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 107(3), pages 375-385, July.
    12. Claudia Buch & Martin Schlotter, 2013. "Regional origins of employment volatility: evidence from German states," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(1), pages 1-19, February.
    13. Uwe Blien & Lutz Eigenhueller & Markus Promberger & Norbert Schanne, 2013. "The Shift-Share Regression: An Application to Regional Employ-ment Development," ERSA conference papers ersa13p614, European Regional Science Association.
    14. Stefano M. Iacus & Giuseppe Porro, 2015. "EU regional unemployment as a transnational matter: An analysis via the Gompertz diffusion processs," Papers in Regional Science, Wiley Blackwell, vol. 94(4), pages 703-726, November.

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