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Labour market flexibility and regional unemployment rate dynamics: Spain 1980-1995

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Author Info
Roberto Bande
Marika Karanassou

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Abstract

This article aims to shed light on the dynamics of Spanish regional unemployment rates and determine the driving forces of their disparities. The Spanish economy has one of the highest unemployment rates in the EU and is characterised by severe regional disparities. We apply the chain reaction theory of unemployment according to which the evolution of unemployment is driven by the interplay of lagged adjustment processes and the spillover effects within the labour market system. Our model includes nationwide as well as region-specific variables, and takes into account the limited labour and firm mobility in Spain. We show that the degree of labour market flexibility differs between high and low unemployment regions, and find that investment has a major influence on the unemployment trajectory. In addition, we find that in bad times high unemployment regions are hit more severely than low unemployment regions, while in good times, high unemployment regions do not benefit as much as low unemployment regions. Copyright (c) 2008 the author(s). Journal compilation (c) 2008 RSAI.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1435-5957.2008.00165.x
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Article provided by Blackwell Publishing in its journal Papers in Regional Science.

Volume (Year): 88 (2009)
Issue (Month): 1 (03)
Pages: 181-207
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Handle: RePEc:bla:presci:v:88:y:2009:i:1:p:181-207

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pablo , Agnese & Hector , Sala, 2008. "Unemployment in Japan: A look at the ‘lost decade’," MPRA Paper 14332, University Library of Munich, Germany. [Downloadable!]
  2. Karanassou, Marika & Sala, Hector, 2008. "The Rise and Fall of Spanish Unemployment: A Chain Reaction Theory Perspective," IZA Discussion Papers 3712, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Marika Karanassou & Hector Sala & Dennis J. Snower, 2006. "Phillips Curves and Unemployment Dynamics: A Critique and a Holistic Perspective," IZA Discussion Papers 2265, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Marika Karanassou & Hector Sala, 2008. "Labour Market Dynamics in Australia: What Drives Unemployment?," Discussion Papers 2008-26, School of Economics, The University of New South Wales. [Downloadable!]
    Other versions:
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