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Regional Inequalities and the Business Cycle: An Explanation of the Rise in European Unemployment

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  • Maria Demertzis
  • Andrew Hughes Hallett

Abstract

DEMERTZIS M. and HUGHES HALLETT A. (1996) Regional inequalities and the business cycle: an explanation of the rise in European unemployment, Reg. Studies 30, 15-29. The introduction of a system of fixed exchange rates in Europe has succeeded in inducing price convergence amongst its participants, but at the same time has increased the divergence between their rates of unemployment. In this paper we attempt to measure the level of the inefficiency imposed on the labour markets as a result of having different labour market structures under one monetary policy, and then use these results to provide a new explanation for the secular rise in European unemployment based on the degree of labour market heterogeneities and the asymmetries in wage settings in each market. As a closer monetary union of its own regions, the UK is used as a comparison for the Europe-wide results. DEMERTZIS M. et HUGHES HALLET A. (1996) Les inegalites regionales et le cycle economique: une explication de la montee du chomage en Europe, Reg. Studies, 30, 15-29. En Europe l'etablissement d'un systeme de taux de change fixe a reussi a inciter a la convergence des prix aux pays membres, mais en meme temps il a fini par accentuer les divergences des taux de chomage. Cet article cherche a mesurer l'importance de l'inefficacite imposee aux marches du travail qui resulte de l'existence de differentes structures des marchees du travail relevant d'une seule politique monetaire. Ces resultats se voient utiliser afin de fournir une nouvelle explication de la montee cyclique du chomage en Europe a partir des heterogeneites et des asymetries de la fixation des salaires dans chacun des marches. Vu que c'est une union monetaire plus etroite de ses propres regions, on met le Royaume-Uni en comparaison avec l'Europe. DEMERTZIS M. und HUGHES HALLETT A. (1996) Regionale Ungleichheiten und der Konjunkturzyklus: Eine Erkarung des Ansteigens der Arbeitslosigkeit in Europa, Reg. Studies 30, 15-29. Dank der Einfuhrung eines Systems fester Wechselkurse in Europa ist es gelungen, eine Preiskonvergenz unter den Beteiligten herbeizufuhren, doch die Divergenz zwischen den Arbeitslosenquoten ist gleichzeitig angestiegen. In diesem Aufsatz wird versucht, die Hohe der Leistungsun-fahigkeit zu messen, die dem Arbeitsmarkt infolge verschiedener Arbeitsmarktstrukturen unter einer Finanzpolitik auferlegt wurde, und dann diese Ergebnisse zu einer neuen Erklarung des wiederholt auftretenden Anstiegs der Arbeitslosigkeit in Europa zu benutzen, die auf dem Ausmass der Arbeitsmarktungleichheiten und den Assymmetrien der Lohnfestsetzungen im jeweiligen Markt beruhen. Das Vereinigte Konigreich mit seiner engeren finanziellen Union seiner Regionen wird als Vergleich zu den europaischen Ergbnissen herangezogen.

Suggested Citation

  • Maria Demertzis & Andrew Hughes Hallett, 1996. "Regional Inequalities and the Business Cycle: An Explanation of the Rise in European Unemployment," Regional Studies, Taylor & Francis Journals, vol. 30(1), pages 15-29.
    • Handle: RePEc:taf:regstd:v:30:y:1996:i:1:p:15-29
    DOI: 10.1080/00343409612331349448
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    References listed on IDEAS

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    1. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    2. Laurence Ball, 1994. "What Determines the Sacrifice Ratio?," NBER Chapters, in: Monetary Policy, pages 155-193, National Bureau of Economic Research, Inc.
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    1. Growth, Recession and Geographical Inequality
      by Brian Ashcroft in Scottish Economy Watch on 2012-07-13 02:40:27

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    1. Kangasharju, Aki & Pekkala, Sari, 2001. "Regional Economic Repercussions of an Economic Crisis: A Sectoral Analysis," Discussion Papers 248, VATT Institute for Economic Research.
    2. Sari Pekkala & Aki Kangasharju, 2002. "Regional Labour Market Adjustment: Are Positive and Negative Shocks Different?," LABOUR, CEIS, vol. 16(2), pages 267-286, June.
    3. Kangasharju, Aki & Pekkala, Sari, 2000. "The Effect Of Aggregate Fluctuations On Regional Economic Disparities In Finland," ERSA conference papers ersa00p26, European Regional Science Association.
    4. Kangasharju, Aki & Pekkala, Sari, 2002. "Adjustment to Regional Labour Market Shocks," Discussion Papers 274, VATT Institute for Economic Research.
    5. Demertzis, Maria & Hallett, Andrew Hughes, 1998. "Asymmetric transmission mechanisms and the rise in European unemployment: A case of structural differences or of policy failures?," Journal of Economic Dynamics and Control, Elsevier, vol. 22(6), pages 869-886, June.
    6. Alex Lammertsma & Clemens J. M. Kool, 2000. "The Phillips Curve, the Persistence of Inflation, and the Lucas Critique: Evidence from Exchange-Rate Regimes: Comment," American Economic Review, American Economic Association, vol. 90(1), pages 312-315, March.

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